Ebb & Flow

Thus, the potential for a summer rally has buysiders willing to wait out the downturn. That said, there’s clearly discontent with the disjointed moves by biotech versus the broader indices. So far this quarter, the BioCentury 100 Index is off 6%, mirroring the 6% declines seen in the NASDAQ Biotech and AMEX Biotech. But the broader NASDAQ index is only down 1% while the DOW is up 3%.

"We’ve been calling every investment banker and trading desk to get insight" into biotech’s slide, said Domain’s Nicole Vitullo. "It appears there’s a real rotation out of biotech, but it’s unclear whether it’s because other sectors are attractive or too many negative events have happened in biotech."

Nevertheless, said Vitullo, "I’m not advocating a go away until September attitude."

Fariba Ghodsian of Dafna Capital Management expects that many investors were putting money to work in biotech in hopes that many small and medium sized companies would be snatched up in an M&A spree by big pharma and bellwether biotechs. Last summer, Pfizer’s $1.9 billion take-out of infectious disease company Vicuron sparked the summer rally.

Ghodsian thinks some investors are disappointed that M&A hasn’t been rampant this year and have now left the space.

Dan Omstead of H&Q Capital Management thinks the issue is that "the market is experiencing a flight to quality, which is a euphemism for

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