Here's my take on this sell-off:
As others have pointed out, the Clinton-Blair proposals are actually bullish for biotechs other than CRA. Certainly the consumers of the genetic info (most of the biotech and pharma industry) are not going to complain if stuff they had to pay for becomes "free." Even from the perspective of HGSI and INCY, the proposals are not alarming. Both have many gene patents already nailed down, and contractual agreements with pharma that ensure royalties from drugs developed from their data.
So basically, this was an emotional sell-off, with the proposal as a trigger, not a cause. Genomic stocks were unreasonably high based on unreasonable expectations. The gene-therapy problems (with VICL as the latest victim), the BGEN downgrades admidst warning of flat Avonex sales, the proposed DNA share sale by Roche, the CHIR gene-therapy failure and last, but not least, the flood of offerings had set the stage, and people were looking for an excuse to sell.
So where does one go from here? Consult your local crystal ball reader. Long-term, the biotech bull market is sound. Short-term, stocks will fluctuate. The brave will use this opportunity to look for bargains. The shell-shocked will stay in their shell holes and whimper. The key is what the institutions will do. They now have enough money sunk in this area that we should see some reassuring noises from analysts in the near term - Mike King was prominent yesterday.
The link between biotech stock price and underlying value has been weakened of late. It is likely to stay weak in the short-term, but in the long run it will still drive stock prices.
Peter |
