Updated with new information at 1:33 pm EDT.
NEW YORK (TheStreet) -- The bloodletting in biotech stocks continued Monday with aggressive selling erasing the year's gains in a key sector exchange-traded fund. Another closely-followed ETF is barely hanging on to its outperformance.
Fears that the next president or Congress might push through legislation to rein in ever-escalating drug prices is the immediate trigger for the biotech sell off. But the sector has been on shaky ground since this summer because of lofty (some say over-inflated) stock valuations and troubles in the global markets.
The latest confidence shaker came mid-day Monday when Democrats in Congress sent a letter to Valeant Pharmaceuticals (VRX) requesting CEO Michael Pearson's appearance at a hearing investigating drug price increases. Valeant shares have lost 12% to $175.46.
Likewise, the SPDR S&P Biotech ETF (XBI) is off 8% Monday and is just barely hanging on to a tiny gain for the year. From its July peak, the XBI is down 31%.
Biotech analysts tried to calm investors' jangled nerves Monday morning with reams of research notes and conference calls arguing the fundamental strengths of the biotech sector remain intact and the odds of politicians doing anything to regulate drug prices remained low.