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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 (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 (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 (XBI) and the iShares Nasdaq Biotechnology ETF (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.