Biotech is hot on Wall Street:
One of Wall Street's ugly ducklings seems to be transforming itself, ever so fitfully, into a swan.
The U.S. biotechnology industry, long on promise and short on delivery for the entire two decades of its history, is finally selling real medicine to real people for actual money. Profits at the leading firms are rising, and explosive growth is likely for some of them over the next few years.
These things have been true for a while now, but Wall Street's perceptions seem to be catching up with reality. Over the past year, the two leading indexes that track biotech stocks have roughly doubled, far outpacing gains in the broader market. In the past 10 weeks alone, the biotech indexes have jumped more than 30 percent.
"The biotech industry has done a really remarkable and effective and efficient job of developing new products," said Jim McCamant, publisher of the Medical Technology Stock Letter, which tracks the industry. "Many of the stocks are still selling at ridiculous prices relative to the drugs they have in development. I think you're going to see the group work its way higher."
Wall Street's reviving interest in biotechnology seems to be following a classic pattern. When out-of-favor sectors come back into the Street's good graces, the first stocks to move are the premier stocks, those with recognizable names and solid balance sheets. After prices of these first-tier stocks have jumped, the favorable sentiment filters down to second- and third-tier companies. In the case of biotech stocks, these would be companies that have drugs in advanced stages of research but have not yet won approval to market them.
After falling sharply during last year's late-summer market correction, top-drawer biotech companies saw big gains at the end of the year. From Sept. 1 to Dec. 31, Amgen Inc. of Thousand Oaks, Calif., the world's largest biotech firm, jumped 71 percent. Immunex Corp. of Seattle, riding high on the success of a blockbuster treatment for rheumatoid arthritis, jumped 125 percent.
For the first half of this year, top-tier stocks such as these basically treaded water, with the American Stock Exchange biotechnology index and the Nasdaq biotech index bouncing up and down with a relatively narrow range. But since mid-June the sector has been undergoing another rally, this one somewhat broader than the last. Select second- and third-tier companies have seen gains, and--barring a broad turndown in the stock market--analysts such as McCamant are predicting more to come....
Fing the rest at: washingtonpost.com.
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