Biotechnology as an investment sector is so hated, it stumbled into bear market mode for the year in less than a month. The jarring 20% decline happened after the group fell 22% last year, against an S&P 500 SPX, +2.24% gain of 27%.
The good news is … As the investing adage says, your best purchases are the ones that are hardest to make. Given how tough it is to get enthusiastic about biotech, this truism tells us the group is a buy. You can take your time to average in, if Yee’s calls continue to be right. He thinks the above concerns could plague the group throughout the first quarter. But he expects the group to end the year higher, which suggests it is already a good time to start accumulating.
M&A will pick up Biotech was in such a freefall that potential buyers just held off, waiting for better prices. Now that biotech stocks are stabilizing and product sales will start showing improvement, buyers will show more interest. Big Pharma certainly has the cash to buy, as you can see from this chart from Jefferies.
As of the end of last year, 73% of the 2021 IPOs were so-called busted IPOs — those trading below their IPO price. But those are mostly early stage companies. Many of them only have drug candidates in pre-clinical development. There will be lots of individual company catalysts This could help turn around investor sentiment. Ahmad cites the Alnylam readout on patisiran, as well as potentially good news from Praxis Precision Medicines PRAX, -2.98% and Sage Therapeutics SAGE, +5.59% on their therapies for major depressive disorder. Yee cites I-Mab IMAB, -0.76%, which may post positive results in its study of its cancer drug Lemzoparlimab; Nektar Therapeutics NKTR, -2.