After rising 25% in one month, the U.S. biopharmaceutical sector plunged hard on Friday

The U.S. biotech and biopharma sector saw a large-scale selloff on Friday, as the substantial cumulative gains built up earlier prompted investors to take profits in a concentrated manner, with the sector’s representative ETF falling as much as 4% in a single day.

Moderna shares dropped 11% to $68.50, ImmunityBio fell 8% to $8.16, and Sarepta Therapeutics declined 8% to $18.84. None of the three companies had any negative news that triggered this drop. The market generally interpreted this pullback as profit-taking after prices ran up to high levels. At the same time, there were clear signs of sector rotation—funds moving from high-beta biotech shares into defensive, large-cap pharmaceutical companies.

The pressure on the sector overall is evident. The SPDR S&P Biotech ETF (XBI), which tracks the representative biotech and biopharma sector, fell 4% on Friday, while Eli Lilly fell only 3% and Johnson & Johnson’s decline was even smaller at just 1%. Large pharmaceutical companies held up relatively better, indicating that market funds are undergoing structural reallocation rather than withdrawing entirely from the biotech and pharma space.

Profit-taking dominated this round of selloff

This decline came after the three companies’ sharp rallies this year. As of Thursday’s close, Moderna’s year-to-date gain was 160%, while ImmunityBio’s year-to-date gain was even higher at 348%. Against this backdrop, none of the individual stocks showed any fundamental downside news.

Looking at recent fundamentals, the latest developments for the relevant companies have actually leaned positive. ImmunityBio’s revenue in the first quarter reached $44.21 million, up 168% year over year, and ANKTIVA’s sales volume also rose 168% over the same period. Sarepta Therapeutics has just received an upgrade from Wolfe Research to a “Outperform” rating with a target price of $27, implying 34% upside from Thursday’s close. Moderna’s first-quarter revenue was $389 million, exceeding market consensus by 65%, and management also reiterated that full-year revenue growth could be up to 10%.

With no negative catalysts and relatively solid fundamentals, the logic behind this selloff points to just one thing—concentrated profit-taking after a parabolic-style rally.

Large pharma stocks held up relatively better, and the rotation signal was clear

On Friday, sector performance diverged in a way that provided an important clue about where market money flowed. Eli Lilly’s year-to-date gain is still 10%, and Johnson & Johnson’s year-to-date gain is 24%, with both declining far less than high-beta biotech shares.

This price gap reveals a clear rotation pattern: funds exited unprofitable, higher-volatility biotech small-cap stocks and instead stayed in large-cap pharmaceutical companies with stronger defensive characteristics and steadier earnings. This is not a broad, systemic de-risking from the entire biotech and pharma sector, but more like an active adjustment of risk appetite.

XBI uses an equal-weight construction method, and Moderna, ImmunityBio, and Sarepta are all constituent stocks in its holdings. The overall drop on Friday indicates that this adjustment was not driven by a single stock dragging the ETF down, but rather a broad pullback at the sector level.

It’s also worth noting that even after Friday’s sharp decline, XBI’s cumulative gain over the past 12 months is still as high as 78%. This suggests the move is more like normal volatility after a rapid run-up, rather than the start of a trend reversal. However, XBI’s equal-weight nature also means that once multiple stocks in the sector pull back in sync, the ETF’s decline is often magnified.

Moderna: heightened bull-bear divergence

Among the three heavily down stocks today, Moderna’s bull-bear contest is the most representative.

The bull case centers on pipeline progress: the FDA decision date (PDUFA) for its influenza vaccine mRNA-1010 is set for August 5; in addition, there are multiple branded products such as Spikevax, mRESVIA, mNEXSPIKE, and mCOMBRIAX; and management has set a year-end target cash holding of $4.5 billion to $5.0 billion, giving the company ample room for operations.

The bear case focuses on valuation and financial pressure: Moderna’s stock price is still down 71% compared with five years ago; first-quarter GAAP net loss was $1.34 billion; cash burn remains elevated; and analysts’ consensus target price is clearly below the current share price. Friday’s single-day drop of more than 10% directly reflects the stock’s high-beta profile and the two-way risks that come with it.

What to watch next

In the near term, the market will focus on whether XBI can stabilize before the close. If the selling accelerates, it would imply additional room for further sector rotation. For Moderna, the August 5 FDA approval decision for its influenza vaccine is the next important catalyst with a clear time marker.

Overall, this sharp selloff in the biotech and biopharma sector looks more like a technical pullback after historic gains than a substantive deterioration in fundamentals. For investors holding the above-mentioned stocks, finding balance between high-beta exposure and potential catalysts may be the most important question to think about right now.

Risk disclosure and disclaimer

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