Biotech stocks/Commentary...
Here is another article from today's issue of the Bull Market Report concerning biotech stocks.
Libbyt
The Bull Market Report - bull-market.com
COMMENTARY
One government official mentions that genomic data should be openly
available to all and access to it unencumbered by proprietary rights, and
blammo, the whole biotech sector comes crashing down. It should be noted
that the government official in question is the President of the United
States, and the genomic data in question has spurned mammoth gains for the
companies creating and researching it. As it turns out, the Federal
Government has funded a great deal of that research, which means the
taxpayers have funded and thus open to the public.
This wasn't that hard to see coming. We knew the government was involved.
We have all heard of "The human genome project." What we couldn't predict
was a presidential decree to the masses, stating the blatantly obvious,
would be so misunderstood.
Let us clarify: The government is not going to steal your favorite
company's data. None of these companies (at least none that we have added
to our portfolio) have been dumb enough to base their business models on
selling what the human genome project will provide to the masses. They
are basing their business models on the products and services that can be
derived from this data.
What many investors became excited about was the fact that many of these
private companies began to outpace the government's decoding of the
genome, which meant that they would be bringing products and services to
market sooner. No one ever thought that they were going to have
proprietary rights to the code.
So, what does this mean to the average investor. "Should I sell my stock
and hide in a corner, or is this the mother of all buying opportunities?"
It depends on the stock.
If your stock is not directly involved in genomics, but dropped with the
sector, then you should not be worried, and if you were considering buying
more of it, this is the very definition of a buying opportunity.
If you own a genomics stock, it gets a little trickier. The number one
question to answer: How is my company going to make money? If they are
going to use the data to create products and services, then you are all
right. If they are simply planning to make their money by licensing human
genomic data, then you have a little more investigating to do.
Before we go any further, one thing needs to be stated: Celera (CRA,
$147, down 42) is going to be OK. They are going to make their money
annotating the human genome map, and by mapping other genomes. Their
business model is intact, and in some ways is actually enhanced by public
release of the human genome. This is a great time to boost your holdings
in Celera.
We are also still feeling strong about Human Genomic Sciences (HGSI, $124,
down 29). Their creation of pharmaceutical and diagnostic products will
be very profitable in the future.
Biotech was such a big story we almost forgot the rest of the market! To
summarize: Both the Nasdaq and the Dow experienced down days, though
neither showed any signs of panic (outside of biotech, that is). In fact,
if it were not for the selling pressure created by biotech, we could have
very well had a positive day, at least in the Nasdaq. The downward thrust
is coming at a bad time, at least for the short term, with triple-witching
day* approaching Friday and interest rate/inflation worries on the rise
again.
Keep informed, and do your homework before making any moves in
biotechnology. |
