Miljenko and John:
Yeah, but!!
1. Before Clinton's inauguration? I agree with the spirit, but that was yet another point where garbage had run with quality.
2. We've got a difficult situation here. Very few companies have pulled off a "Millennium". Very few companies have matched the brilliance of stock performance with managerial brilliance. If those strong currencies don't get spent, soon, to access products and pipe, we'll [likely, IMO] see a strong sector correction.
That is, it isn't the companies with near-term staying power that have exploded. It's again platform, platform, platform.
I personally think that this is very healthy for the sector, long-term. Liquidity in places where products (databases) simply can't fail. It will only strengthen the "basis" for the current rally; biotech is throwing molecule after molecule into the "potential product" basket.
I also think that we're due for a correction. However, I personally believe that fund managers, those with records of having been trounced by the small investor, should keep their mouths shut until their records indicate that they are worthy to comment. We've roasted one fund manager here at SI until he was crispy.
The correction? Certain chip companies, B2B "biotechs", lab-on-chips, bioremediations, and genomics are way out of whack. If there's some innovative M&A out there that can sustain those currencies, great. However, how could any management team have foreseen a rally this strong. It is unlikely that HGSI has anything in place that can back the product of their own hype. Hope I'm wrong.
If a correction does come? There are yet some under-valued companies out there. They'll be even cheaper if and when.
If a correction doesn't come soon? Picking an example.... CRGN can't continue to go at this rate. What do you want, 10% from here in a year? The CRGN-type investor, the momentum investor, wants 100%. Not going to happen, or, if it does, it will happen quickly while this frenzy still isn't touched by rationale. The underlying fundamental of biotech valuation will always revert to the pricing of a pharmaceutical, what demographics, reimbursement, etc. will tell you. An early-stage drug discovery technique doesn't effect those fundamentals. It can only determine a growing number of "hits" for the far-off future.
We've been through this for INCY once before. The promise is still strong, love the concept. Without more "MLNM"-like deals, however, we'll see more modest valuations IMO.
Gonna be interesting!
Rick |
