$XBI, a biotech index, is experiencing significant weakness, with notable declines in individual stocks such as $NUVL, $KRYS, and $IOVA. The index is reportedly facing record underperformance compared to the SPY and QQQs, indicating a sharp market disconnect despite record-high assets under management (AUM) in healthcare hedge funds. This situation presents substantial opportunity costs, particularly for underperforming healthcare funds. Analysts suggest that even minor redemptions from these record-high AUMs could severely impact illiquid biotech markets, worsening the ongoing downturn. Additionally, there is a notable interest in biotech options, with 1,000 June $112 calls for $XBI purchased at $2.70, following early January bull spreads. The market is also seeing increased speculation regarding potential mergers and acquisitions in the biotech sector for 2025.