XBI blues continue for biotech 

XBI slumps to a 52-week low, but could a healthier biotech ecosystem be in sight?

The XBI tumbled to a 52-week low Thursday, leaving the index down 19% in 2023, during a year that has seen the NASDAQ rise 26%.

“We’re getting closer and closer to the lows of the XBI that we saw last year,” said Oppenheimer’s Michael Margolis. 

Last year’s low for the SPDR S&P Biotech ETF (XBI), which tracks small and mid-size biotechs, was $62.81, reached on May 11. The index fell to $66.91 during Thursday’s session, before settling at $67.09. The iShares Biotechnology ETF (IBB) ended the day at $117.61, just off its 52-week low of $117.30, which was recorded last October.

“We’re probably in the worst biotech market we’ve ever seen at this point,” Margolis said. He noted, however, that the sector is not without its bright spots, including an environment in which innovation has “never been better,” M&A is on track to have one of its best years in a long time, and financings are back to being catalyst-driven. 

“The XBI, I think it’s more of a psychological index for a lot of people because there are higher quality companies that have performed well,” he said. “Higher quality companies, even smaller cap names, have been able to really create value in a relatively short period of time. So, I think that’s encouraging, but I will tell you the bar is really high. Investors are taking their time doing their work and investors are under pressure.”

The comments by Margolis, senior managing director, co-head of healthcare investment banking at Oppenheimer & Co., came Thursday during a BioCentury-Oppenheimer webinar, “Creating High-Value Biotechs: The Tier Jumpers.”

“I don’t even look at my phone anymore because there’s not much that we can do about it,” said Boundless Bio Inc. CFO Jami Rubin on the webinar, echoing Margolis’ comments on the XBI. “But I actually think what we’re going to go through is a really healthy process for the ecosystem.”

Of the 800 publicly traded biotechs, she said that “a very large proportion” are trading at $100 million or less. “What is different this time,” she said, “you can’t just go out and raise money every 18 months as most companies used to.”

“Creating High-Value Biotechs: The Tier Jumpers” is a free, on-demand webinar presented by BioCentury & Oppenheimer.