Massive Sell-Off in Biotech Hits Hedge Funds

New York (HedgeCo.net) – Over the last eight trading sessions, the NYSE Arca Biotech Index has lost 18.74% which is an incredible short-term decline for an index. Yes the overall market is down over the same time period, but only 5.33%.
The selling started with two things—presidential hopeful Hillary Clinton tweeting that “Price gouging like this in the specialty drug market is outrageous. Tomorrow I’ll lay out a plan to take it on.” Of course her tweet was in reaction to the New York Times article about Martin Shkreli and Turing Pharmaceuticals raising the price of Daraprim from $13.50 to $750 per tablet.

The biotech sector had already been struggling in the third quarter, but after the combination of news and Clinton’s tweet, the selling has accelerated. According to a recent article from Reuters, the selling has hurt health-focused hedge funds especially hard. The article stated that Baker Brothers Advisors, Healthcor Management, Palo Alto Investors and Deerfield Management are all looking at potential double-digit losses for the month of September and those numbers were based on the 13F filings at the end of June.

The Reuters article also stated that some managers think the selling is overdone at this point and they are looking for bargains within the sector.

Rick Pendergraft
Research Analyst
HedgeCoVest

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