The S&P Biotechnology Select Index broke below the 200 day moving average as buyers took a pause after the >50% rally off the June lows into this week's Fed talking points at the Jackson Hole retreat.
The 10-year Treasury yields bounced back above 3% as expectations for hawkish rhetoric increased.
Biotech investors enter a relatively quiet post earnings period until the medical meeting and bank conference calendar picks up next month. Bulls will be hoping for more surprise M&A and positive clinical data headlines to keep the rally going while bears are looking for signs of further tightening in capital markets that may ratchet up fears of punitive dilution.
Last week's FDA approval of bluebird bio's (BLUE) Zynteglo marked a watershed scientific achievement as the first gene therapy approved for patients with beta-thalassemia. BLUE plans to launch the drug with a $2.8 million price tag, making it the most expensive therapy in the US. The high price, outcomes-based payment agreements, complicated administration logistics, high COGS and alternative therapies led several analysts to downgrade the stock following the approval.
BLUE's sub $500 million market cap and high dilution potential is a clear reminder that biotechs often become show-me stories during a bear market.