reverting to an earlier era where every biotech but the profitable ones remained at best a cut above penny stock status and were driven to MA activities to survive -- selling out to large pharmas or merging with each other for protection.
I think there are a few reasons why things (I hope) are different now. First, biotechs gobbled up between $20 and $30 billion during the bubble. That's a substantial cash cushion that didn't use to be there. Second, the "terms of trade" between the pharma and the biotechs have changed substantially. What used to be 10% royalties (or even less) are suddenly 50:50 partnerships. Third, there are many more biotechs that are in sight of profitability.
I do agree that the weaker biotechs will get swallowed up (assuming they have decent programs, that is).
On a macro level, I grant things are pretty scary for the economy right now. Today's PPI had more than a whiff of deflation. Even at these depressed prices, I hardly see a stock like INTC as a bargain - it still sports a PE well above what a cyclical producer of a commoditized product deserves. I'm not sure that CSCO is any better, although I don't understand that market as well.
I recall doing a comparison of AMGN and CSCO (earnings, R&D expense, growth rate, PE) on this thread a while back. If I can locate it and have the time, an update would be interesting.
Personally, I moved some money into Treasuries today. Despite the biotech bargains on offer things are looking increasingly jittery out there.
Peter |
