Biotech ETF Leaks Cash as M&A Frenzy Goes AWOL at Key Conference

(Bloomberg) -- Investors pulled money from the SPDR S&P Biotech ETF after a rather dull and disappointing tone was set at the massive J.P. Morgan Healthcare Conference last week.

Investors withdrew more than $135 million from the exchange-traded fund Friday, the most in almost a month. It was a sharp reversal from the start of the year, when more than $400 million poured into the fund in just the first week, according to data compiled by Bloomberg.

But extra access to cash from tax reform and repatriation had some investors crossing their fingers that 2018 would give large companies like Amgen Inc. and Gilead Sciences Inc. the extra firepower to make blockbuster deals, with many expecting a slew of announcements at the start of the conference. Last year was the slowest for takeovers since 2013 for biotechnology and pharma deals by dollar volume.

For some companies, the prices are simply too high to go shopping; with Merck & Co.’s president of global human health, Adam Schechter, telling Bloomberg that "valuations are still very high."

The biotech ETF fell 2.7 percent Monday as of 3:28 p.m. in New York, with AveXis Inc, one of its holdings, sinking the most in more than a year as a lackluster start to 2018 led Nomura analysts to see more drug delays.

The conference is usually preceded by at least one big deal that wows analysts and investors alike. This year, it was was Celgene Corp.’s $1.1 billion acquisition of closely held Impact Biomedicines. But the deal did little to excite biotech stocks that have lagged the S&P 500 Index over the last two years.

--With assistance from Cynthia Koons

To contact the reporters on this story: Carolina Wilson in New York City at cwilson166@bloomberg.net, Bailey Lipschultz in New York at blipschultz@bloomberg.net.

To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net, Brendan Walsh

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