Biotech Stocks: Seeing Rainbows, Missing The Rain

"We’re living through major changes in how medicines are developed that will improve our lives for the better. But that doesn't meant biotech stocks won’t retreat. Quite the opposite: Biotech innovation is funded in great part by investors whose timing is wrong, and who get left holding the bag at the end of the sector’s inevitable boom cycles, only to have some of the companies, products, and technologies they bet on succeed later on."

Even if the biotech boom has been fueled in part by fundamentals, the author points out 3 things which placates the misplaced optimism he has heard from investors and executives, or seen in the polls of buy siders run by ISI Group’s Mark Schoenebaum:

1. We have not reversed the decline in R&D productivity. We probably haven’t even slowed it.
2. The FDA is not fundamentally friendlier to companies than it was in the past.
3. Pricing Power May Not Last Forever.

Article on +Forbes:

Biotech Stocks: Seeing Rainbows, Missing The Rain
The Nasdaq iShares Biotechnology Index, by YCharts This week’s 10% drop in the Nasdaq iShares’ Biotechnology Index — not to mention the fact that biotech stocks, after a torrid two years, are up less than 4%  year-to-date — has investors worrying that the sector’s two-year boom is over. We’re living through major […]

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Walking Enthusiast, Technology Transfer Advisor @ Concordia University, Intellectual Property Valuation Expert @ Kalotem & Amateur Photographer.