After rising 25% in one month, the American biopharmaceutical sector suffered a heavy blow on Friday.

The US biopharmaceutical sector experienced a large-scale sell-off on Friday, as the massive accumulated gains triggered profit-taking. The representative ETF of the sector dropped 4% in a single day. Moderna's stock price fell by 11% to $68.50, ImmunityBio dropped by 8% to $8.16, and Sarepta Therapeutics dropped by 8% to $18.84. None of these companies had any negative news triggering the decline, and the market generally interpreted this pullback as profit-taking at high levels. At the same time, there were clear signs of sector rotation of funds - from high-beta biopharmaceutical stocks to defensive large-cap pharmaceutical companies. The pressure on the sector as a whole is clearly visible. The SPDR S&P Biotech ETF (XBI), representing the biopharmaceutical sector, fell by 4% on Friday, while Eli Lilly only fell by 3%, and Johnson & Johnson fell by only 1%. Large pharmaceutical companies showed relative resilience to the decline, indicating that market funds are undergoing structural reallocation rather than a complete exit from the healthcare sector. Profit-taking dominates the current decline This decline occurred after significant increases in the shares of these three companies since the beginning of the year. As of Thursday's close, Moderna had accumulated a 160% year-to-date increase, while ImmunityBio had a higher increase of 348%. In this context, no individual stock showed any fundamental negative news. Looking at the recent fundamentals, the latest developments of the companies actually leaned towards positive. ImmunityBio reported revenue of $44.21 million in the first quarter, a 168% year-over-year increase, while sales of ANKTIVA also grew by 168% during the same period. Sarepta Therapeutics was just upgraded by Wolfe Research to "outperform the market", with a target price of $27, implying a 34% upside from Thursday's closing price. Moderna reported revenue of $389 million in the first quarter, exceeding market consensus by 65%, and management reiterated that full-year revenue growth could reach up to 10%. With no negative catalysts and relatively strong fundamentals, the logic behind this decline points to concentrated profit-taking after parabolic increases. Clear rotation signals in large pharmaceutical companies The sector divergence on Friday provided important clues about the flow of market funds. Eli Lilly still had a year-to-date increase of 10%, while Johnson & Johnson had an increase of 24%, with both experiencing much smaller declines compared to high-beta biopharmaceutical stocks. This price difference reveals a clear rotation logic: funds are flowing out of biopharmaceutical small-cap stocks that are not yet profitable and have higher volatility, and instead moving towards large pharmaceutical companies with stronger defensive attributes and stable profitability. This is not a systematic reduction in the healthcare sector, but rather an active adjustment of risk preference. XBI is constructed using equal weights, with Moderna, ImmunityBio, and Sarepta all being components of its holdings. The overall decline on Friday indicates that this adjustment was not caused by a single stock but rather a widespread pullback at the sector level. It is worth noting that despite experiencing a significant decline on Friday, XBI has still accumulated a 78% increase over the past 12 months. This data suggests that this adjustment is more of a normal oscillation after a rapid rise, rather than the beginning of a trend reversal. However, the equal-weight characteristics of XBI also mean that once multiple stocks within the sector simultaneously decline, the downturn presented by the ETF tends to be magnified. Increased divergence between longs and shorts on Moderna Among the three significant declining stocks today, Moderna's long and short positional game is most representative. Bullish logic focuses on pipeline progress: the FDA approval decision date (PDUFA) for its flu vaccine mRNA-1010 is set for August 5, along with several other brand products such as Spikevax, mRESVIA, mNEXSPIKE, and mCOMBRIAX, as well as the management's target of holding cash from $4.5 billion to $5 billion by the end of the year, providing ample operating space for the company. Bearish logic, on the other hand, focuses on valuation and financial pressures: Moderna's stock price is still down 71% from five years ago, with a GAAP net loss of $1.34 billion in the first quarter, cash consumption still at a high level, and analysts' consensus target price significantly below the current stock price. Friday's more than 10% decline intuitively demonstrates the stock's high beta nature and the two-way risks associated with it. Future focus points In the short term, the market's focus is on whether XBI can stabilize before the close, as an accelerated decline would indicate further room for sector rotation. For Moderna, the FDA approval result for the flu vaccine on August 5 is the next important catalyst with a specific time point. In summary, the sharp decline in the biopharmaceutical sector this time is more akin to a technical retracement after a historic rise, rather than a substantial deterioration in fundamentals. For investors holding the above stocks, balancing between high beta exposure and potential catalysts may be the most important question to consider. This article is from "Wall Street News", author: Zhang Yaqi, GMTEight Editor: Li Cheng