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XBI on a Downward Slope, but How Steep?

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XBI on a downward trend

After a flat couple of days, markets turned positive with the Dow Jones Industrial Average gaining 0.4% and the broader market representative the SPDR S&P 500 index gaining ~0.6% on March 16, 2016. However, the pressure on biotech and healthcare continued as the SPDR S&P Biotech ETF (XBI) lost another 1.2% that day. XBI closed at $48.31.

The above chart gives insight into XBI, the SPDR S&P 500 ETF (SPY), and the top performers of XBI as on March 16, 2016. YTD (year-to-date), XBI has returned -31.2%, compared to SPY’s return of -0.3%. XBI has thus underperformed the market so far this year.

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Top Performers

The top performers of XBI on March 16, 2016, were Opko Health (OPK), Ophthotech (OPHT), Seattle Genetics (SGEN), and Geron (GERN), which gave returns of 2.9%, 2.5%, 2.4%, and 1.9%, respectively.

In a recent press conference, Opko Health announced that it was “dosing…the first subject in a Phase 1 single dose escalation study evaluating the safety and pharmacokinetics of a long-acting Oxyntomodulin (MOD-6031) in healthy, overweight or obese subjects. The study is intended to enroll 40 subjects in Israel.” The drug is used for the treatment of obesity and type II diabetes.

Opko Health closed at $10.23 and was trading above its 20-, 50-, and 100-day moving averages. YTD, the stock has returned 1.8%, and in three months, it has returned 0.9%—outperforming the broader market so far in 2016. The stock has a book value of $3.63 per share. With its current price, the stock is trading at a price-to-book value of ~2.8x.

Opko Health accounts for ~1.7% of XBI’s total portfolio.

Now let’s analyze the recent performances of XBI large-cap companies.

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