Alkermes FDA Refusal: Biotech ETFs Dragged Down

This article was originally published on ETFTrends.com.

Biotechnology stocks and biotech ETFs were among the worst performing areas of the markets Monday as Alkermes (NasdaqGS: ALKS) shares plunged after the U.S. food and Drug Administration refused to review the drugmaker's treatment for depression.

The First Trust NYSE Arca Biotechnology Index Fund (NYSEArca: FBT) was the worst performer Monday, falling 5.6% and testing its long-term support at the 200-day simple moving average.

The SPDR S&P Biotech ETF (NYSEArca: XBI) and the iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB) both declined 4.8% Monday.

Related: 3 Reasons Why Dow Has Plunged 700 Points

Meanwhile, the Direxion Daily S&P Biotech Bear 3X Shares (NYSEArca: LABD), which takes the -3x or -300% daily performance of the S&P Biotechnology Select Industry Index, capitalized on the misfortune in the biotech sector, surging 14.2% Monday.

Dragging on the biotech sector, Alkermes shares plummeted 22.4%. ALKS makes up 3.4% of FBT, 1.5% of XBI and 1.2% of IBB.

Alkermes revealed that it received a "Refusal to File" letter from the FDA regarding the company's application for a new drug called ALKS 5461, CNBC reports.

According to the FDA, there was insufficient evidence for the drug's effectiveness and was "unable to complete a substantive review". The FDA added that "additional well-controlled clinical trials are needed prior to the resubmission of the [new drug application] for ALKS 5461."

Biotech Sector Worst Performing Areas in Market Sell-Off

The biotech sector along with other growth-oriented U.S. names were also among the worst performing areas in the ongoing broad market sell-off. Market participants grew increasingly anxious on renewed fears of a global trade war after China imposed additional tariffs on 128 U.S. products, Reuters reports.

Furthermore, U.S. markets are nearing their support at the 200-day moving average, which has put additional pressure on equities as technical traders see a bearish signal.

“Failure to hold the 200-day (moving average on S&P 500) has put downward pressure on the market,” Ryan Larson, head of U.S. equity trading, RBC Global Asset Management, told Reuters. “As fundamentals tend to take a back seat, technicals are a few of the indicators that people hold on to in period of extreme volatility.”

For more information on the biotech segment, visit our biotechnology category.