Equities L Biotechnology C
When Fed Chair Janet Yellen commented last July about biotechs whose valuations were “substantially stretched, ” we took it with a grain of salt. High valuations in the space are normal, and after a very healthy correction last April, we thought the space still had room to run.
Now, however, we seem to be in the midst of genuine frothiness in biotechs. When we see valuations pricing in the assumed success of drugs that are currently in Phase 1 trials, we know something is amiss. Remember that Phase 1 is the earliest clinical stage, with about an 80 percent chance that the drugs will ultimately fail to be efficacious, or that they will be derailed by side-effects.
If a stock’s valuation is pricing in a 100 percent chance of success for a Phase 1, that’s froth, pure and simple.
We have seen such euphoria not just in smallcap biotechs, but even in their mid- and big cap brethren. Recent price action in the shows that the market may be coming to its senses:
Source: Google Finance
Note, though, that this process may just be beginning: as we write, the index is still up more than 12 percent on the year.
Just as April last year offered a more attractive entry point for biotechs, we think something similar may now be unfolding. We are believers in biotech as a long-term theme, and would be happy to see valuations become a little more grounded. To us, this would ultimately be an opportunity to buy robust, inventive companies whose products will be in increasing demand in a world with aging populations and significant unmet needs in chronic illnesses.
Investment implications: We are fundamentally buyers of biotech weakness. Yet we believe current valuations do indeed express unrealistic euphoria. We will welcome a healthy correction in the space, as we welcomed it last year, as an opportunity to buy some of our favorite names at more reasonable prices. Stay tuned; after a correction, we will have some specific biotech recommendations.What you put in is what you get out meaning? What are clue cells? How to use drano tricks tips? Tips on what to check for before backing up with your vehicle? What is a photon? Where can i watch how to train your dragon? How to retrieve archived emails in gmail? How to hair care tips? What is the meaning of impertinent? Tips on how to run a successful salon? What hotels does hilton own? What is the meaning of chassis? How to name skateboard tricks? How to buy more storage? What does gj mean? What is asymptomatic mean? What is a bbw? 6 expert tips on how to start running? What does rapture mean? What are today's mortgage refinance rates? Tips to lasting longer when smoking? How to learn pen tricks? What waning crescent meaning? What does hygge mean? How to store peaches? What tricks do you need t know to be on midwest xplosion cheer? how much dis hamburger helper cost in the 1970s how do i delete panda helper What does unencumbered mean? How many credits do you need to graduate? What does colate mean? What does scoliosis mean? What dinosaur has 500 teeth joke meaning? What is a con artist? What does mopar mean? Tell me how to cut ballerina nail tips? When a toxic person can no longer control you quote meaning? What does suki suki daisuki meaning? What does the evil eye symbol mean? Which graco tips work on harbor freight? What are the gifts of the holy spirit? How to make chicken and dumplings? How to soak off dip nails with tips? What team does michael jordan own? Q tips what are they for? What does gauge mean? What are the different types of diabetes? What is a airbnb? What is sodomy 1st degree? What does cagr mean? Tips for dealing with someone who splits and bpd? What does av mean? Don't hear what i'm not saying meaning? How long does it take for nyquil to kick in? What does the spleen do for the body? What is the dea? What does a gua sha do? What does miscarriage feel like? What is the meaning of the word vulnerable? How long does it take to get abs? What do crossed chopsticks meaning? How to delete google reviews? Why cant i learn tricks on a butterfly knife? How to pronounce jeanne? What does arrivederci mean? How to stop hiatal hernia attack? How to motivate yourself? What does mid mean on tiktok? What does tax deductible mean? How long do you cook steak tips in the oven? How to trim aloe vera tips? What does fbf mean? What does retreat mean? What does barred mean? How can earlier tips morning? What does expeditiously mean? What is black butterfly meaning? How to crouch in gta 5? What is considered a high fever? What euphoria girl are you? Tips on how to stall a horse? How to make lasagna? What does don't @ me mean? How to hem jeans? What does empathetic mean? How to write a personal statement? How to grow lemongrass? What is the meaning of awoman? who is brienne's horse helper How to pool tips? How to sketch tips and tricks? What does strenuous mean? How to update graphics driver? What does it mean to be selfless? How to tie a loop knot? What does it mean when your eyes are swollen? What does appearance mean? Why are the tips of my weed plants curling? What does code 4 mean? What is collagen good for? Rib tips what meat? How to join the fbi? What is per diem charge meaning? Love it when you hate me meaning? When coloring in a tattoo what are some tricks to help? How long does it take to get your taxes back? What is the meaning of uwc? What does 450 tips xmas tree mean? What is the meaning of the confederate battle flag? Tips on how to play texas holdem? What is the meaning of the super bowl halftime show? How to delete a blank page in word? What is change management? What does english dubbed mean? What is speciation? What does dosvedanya mean? What are arrows shot from untuned bows likely to do? What is the meaning of my name renu?