Biotechnology's a volatile sector that can intimidate many investors, but it's also a landscape of stocks that can reward portfolios with giant gains. The Nasdaq Biotechnology Index has held its own this year, more than doubling the year-to-date performance of the Nasdaq by gaining 28%. That didn't work this week, however, as the biotech index fell around 2% over the past five days. What happened in the sector that took biotech stocks down? Let's look at the top movers and what you need to know.
Who's weighing down the sector?
The bad week has hit investors hard, as biotech's two big ETFs -- the SPDR S&P Biotech ETF (NYSEMKT: XBI ) and iShares Nasdaq Biotechnology (NASDAQ: IBB ) -- fell 3.8% and 2%, respectively. Some of that drop can be blamed on the market's overall jitters this week. Yet health-care stocks have performed well over the past month: On the S&P 500, the health sector has ranked third in month-to-date performance behind only consumer staples and telecoms.
Yet biotech had some big losers over the past week that weighed down the sector at large. Biogen Idec (NASDAQ: BIIB ) comes in with a 2.9% weight of the SPDR biotech ETF, and the stock's 5.3% slump this week didn't help the fund make any headway. In fact, Biogen ranked among the Nasdaq's worst major biotech stocks over the past five days, after Citigroup downgraded the stock to "neutral" on Wednesday. Citi analysts cited concerns over the company's sales in Europe for the hit, but don't be so quick to sell: Biogen's latest multiple sclerosis drug, Tecfidera, has impressed analysts with its U.S. launch earlier this year and could be on pace to hit more than $3 billion in sales by 2017. That's some revenue power that investors shouldn't turn their noses up at.
Fellow major biotech stock Regeneron (NASDAQ: REGN ) lost 5% during the week, part of a sustained 15% slump over the past month. Like Biogen, however, Regeneron's a company with a drug preparing for a strong future. The company's asthma therapy dupilumab, made jointly with Big Pharma's Sanofi, absolutely crushed a mid-stage clinical trial by paring asthmatic episodes back 87%. While the drug will need to proceed through later-stage trials before reaching the approval stage, things are looking up for this potentially high-flying asthma therapy in a highly lucrative market.
Few biotechs were hit as hard as Achillion Pharmaceuticals (NASDAQ: ACHN ) this week, however. Achillion makes up around 2% of the weight of the SPDR Biotech ETF, and its 7.5% loss this week was a major reason for the fund's fall. This stock has failed to capitalize on the markets' surge this year, losing 10% year-to-date. The company only recently named a new CEO, lifting its former R&D head and chief science officer to the top job. Achillion's still in the developmental stage of its life and thus produces no revenue, and the company's cash burn makes it seem likely that more share dilution is on its way as the company looks to advance its hepatitis-C pipeline over the coming years. Until Achillion produces some meaningful results from that pipeline, this stock will remain a risky play in an already risky space.
While you can certainly make huge gains in biotech and pharmaceuticals, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.