Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

It's biotech prom, and the band never showed up.

A nasty selloff of biotech stocks marred the first day of the usually upbeat JPMorgan health care conference on Monday, the worst trading start to the conference since 2001. There was no Hillary Clinton price tweet panic to explain it. If anything, the day was light on news. Despite that, the Nasdaq Biotech Index (NBI) closed near its autumn low, topping an already disastrous start to the year. It seems the biotech industry is playing to a tougher crowd in 2016.

Long Way Down
A months-long recovery from an ugly fall for biotech stocks has been wiped out.
Source: Bloomberg

After five years in which biotech shares seemed to go nowhere but up, investors may need to re-calibrate their expectations for how these stocks behave. 

There were individual stock moves on Monday that made sense. Biotech stalwart Celgene fell 5.6 percent after giving disappointing fourth quarter earnings estimates and announcing a CEO succession. Vertex fell 6.1 percent -- and is down 20 percent for the year -- after giving cautious sales estimates for its blockbuster Kalydeco, which treats cystic fibrosis. And Bluebird Bio took a 19 percent hit on news that investors won't get updates on a key blood disease gene therapy until late in the year.

But this selloff, which continued into Tuesday, was industry-wide. And it goes above and beyond the pain the broader market: The NBI is falling significantly faster than the S&P 500, health care stocks in general, and even energy stocks: 

Not a Race to Win
Biotech has underperformed the rest of the market substantially in 2016
Source: Bloomberg

Nothing has changed about the industry's big negatives, including fears of tighter drug-price regulation. And the industry's positive themes -- lots of drug launches, an active deal climate and potentially blockbuster medical developments -- are still in place.

But the positives suddenly lack the same weight. After five years of share-price growth, most of the optimism on display at the JPMorgan conference has already been more than priced in. Firms now need to execute on what they've promised and can no longer rely on the sort of leeway a bull market grants.

Many investors were badly burned by the Valeant controversy and last fall's stock decline, triggered by Clinton's tweet and worries about pricing regulation. They are now less inclined to take a company's stories and projections at face value. And the negative headlines, election-season rhetoric, scrutiny of drug company practices, and generic drug pressures are sticking around this year. 

Many of the next exciting potential advances for the industry -- things like gene therapy to cure genetic diseases, therapies that harness the immune system to destroy blood cancers, and advances in neurology -- are in most cases still long-shot bets.

In this environment, it's more likely that individual stocks might be able to outperform on excellent data, positive surprises, or good operating performance than that the whole NBI will return to last summer's giddy heights.  

CEOs at the JPMorgan conference have talked up the industry's strong fundamentals and largely downplayed pricing pressure. But as much as they might not like to admit it, they're operating in a different, less friendly world. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Max Nisen in New York at

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Mark Gongloff at