While NYSE and Nasdaq stocks took a tumble in heavy volume Monday, some companies were impervious to concerns about oil prices or the financial troubles of tiny Mediterranean nations.
Biotechnology stocks frequently move independently of the broader market, or, in technical jargon, they often show a low correlation to indexes. They are often immune to wider concerns about the economy.
Disparate pieces of news affected the biotech industry on Monday.
Illumina (ILMN), whose research processes are used to research diseases and develop drugs and molecular tests in clinical labs, advanced 2.86% in heavier-than-normal volume on Monday, bucking the wider market trend.
The company announced that it would sign a 15-year lease with REIT BioMed Realty Trust (BMR) for a 360,000-square-foot laboratory and office compound in Foster City, California.
A real estate transaction of that magnitude sends a message about a company's future prospects. Earnings and revenue growth at Illumina have been accelerating in recent quarters, and analysts expect earnings to grow 20% this year.
Illumina has a market cap of $27 billion, but it still has a beta of 1.86, indicating its volatility relative to the broader market. But that lack of correlation within the overall sub-sector of biotech also has, of course, a down side. Frequently, you'll see individual stocks within that industry display sudden price moves, in either direction, in response to company-specific news.
Sometimes, news from pre-IPO companies may bode well for the entire biotech industry.
For example, Moderna Therapeutics, a Massachusetts biotech, raised $450 million from venture capital firms, as well as AstraZeneca (AZN) and Alexion Pharmaceuticals (ALXN). Moderna specializes in developing experimental drugs in the relatively new area of messenger RNA. Analysts say the capital infusion was one of the largest private biotech investments to date.
Biotech, as a whole, have held up well over the past few months, trading independently of stocks that are more sensitive to the economy, commodity prices, or just the day-to-day news-driven worries.
Large caps, such as Gilead Sciences (GILD), Celgene (CELG), Alexion and Amgen (AMGN) weathered 2014's rough patches fairly well, for the most part. Analysts expect those companies to deliver solid earnings growth for 2014, when they report, and for this year.
Of course, small-cap biotechs can be notoriously volatile. In addition, many trade below $10, making them especially precarious. Unfortunately, many people like to take a flier on these speculative stocks, lured by outsized gains on news of a development such as a successful clinical trial. On the other hand, bad news can sink one of these firms in a heartbeat.
For example, Biota Pharmaceuticals (BOTA), which closed Monday at $2.85, plummeted 34% on April 29, on news that a government-sponsored clinical trial had been canceled.
Because of the potential to be whipsawed by news, these smaller stocks from the biotech sector can be particularly difficult to hold, or even trade.