By Josh Nathan-Kazis

A run-up in biotech and drug stocks that sent valuations soaring through the second half of 2025 was looking a bit shaky on Monday, as investors poured cash into energy shares following the U.S. operation to seize Venezuelan President Nicolás Maduro.

The NYSE Arca Pharmaceutical Index, which tracks big drugmakers, was down 1.7% in early afternoon. The State Street SPDR S&P Biotech ETF, which trades under the ticker XBI and follows small and midsize biotech firms, fell 2.3%.

The State Street Health Care Select Sector SPDR ETF, which tracks the broader healthcare sector, was down 0.5%, while the S&P 500 was up 0.8%. The selloff wasn't touching managed care names: UnitedHealth Group was up 2.8% and CVS Health was up 0.4%.

For the drugmakers, though, there was carnage up and down the Street. Biogen was down 2.1%, Gilead Sciences fell 3.2%, and AbbVie lost 4.3%. Eli Lilly, the largest player in the sector, was down 3.8%, while Bristol Myers Squibb declined 1.5%.

It was a worrying sign after what had been a startlingly strong end to 2025 for both the healthcare sector at large, and biotech and drug stocks in particular. Mizuho healthcare equities strategist Jared Holz told Barron's Monday that the biotech selloff is likely in part due to a broader market shift that sent the S&P 500 Energy Sector index 3% higher on Monday.

Investors are predicting that U.S. intervention in Venezuela will eventually help the oil companies. Some of the capital moving into energy stocks could be coming from selling of pharma and biotech shares.

There is also a possibility that biotech investors are disappointed by a lack of news about mergers and acquisitions in the sector. The XBI rose nearly 50% in the last six months of 2025, a historic stretch of outperformance for biotech, in large part on the belief that the pace of biotech M&A will continue to accelerate.

Pharma companies often announce big biotech acquisitions early in the year, but no notable news came Monday morning. With valuations up so significantly in recent months, expectations are very high.

"I think the lack of deal activity is putting pressure on biotech," Holz said.

The question for investors posed by biotech's strong performance last year was whether the run-up a sign of outperformance yet to come, or whether demand for biotech stocks had been sated.

On Monday, the second trading day of the year, things weren't looking good for the biotech bulls.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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January 05, 2026 13:52 ET (18:52 GMT)

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