The valuations of small biotech companies are looking a little bloated, according to a Federal Reserve report accompanying testimony by Chairwoman Janet Yellen, an opinion that weighed down share values across the industry. In the report, the Fed points out that "valuation metrics in some sectors do appear substantially stretched--particularly those for smaller firms in the social media and biotechnology industries, despite a notable downturn in equity prices for such firms early in the year," adding later that "ratios of prices to forward earnings (remain) high relative to historical norms." And while that's not exactly a damnation of small-cap biotech, it sent the industry's exchanged traded fund ($IBB) down about 2% on Tuesday morning. Report (PDF)