I agree with your view that development stage biotech stocks seem oversold, but there are reasons other than purely economic, which help explain why the entire group is under pressure.
This morning's news featured FDA complete response letters to Pfizer and Merck on new drugs they had expected would be approved after further testing. Viking Therapeutics also reported that the FDA halted clinical testing on one of its drugs, currently in phase 1b. There have been other recent FDA rejections, which suggest to me that this is partly a reaction to the FDA action overruling its own advisory committee, granting approval for a Biogen drug to treat Alzheimer's Disease, even though the drug has questionable efficacy.
In short, the FDA lost a lot of credibility when it approved the Biogen drug last June, and recent FDA rejections of other drugs look like an attempt to compensate for what many observers thought was a politically inspired approval of the Biogen drug.
These kinds of shenanigans have wiped out a lot of market value in the biotech sector, and many stocks that I have been monitoring look oversold. But the economy, including the threat of continued inflation and the assumption that the Federal Reserve will raise interest rates, have also depressed many stocks other than biotechs. Stocks now have to compete with the higher yields and safety of bonds, causing the entire stock market to sell off. I don't think this trend is over. Whether the biotech group will go lower, or take longer to recover is still debatable. Several biotechs that I currently own remain under pressure: IONS, FGEN, VKTX, ANIK, and even AstraZeneca and Gilead, which differ from most development stage biotechs because at least they are making money.
I like the low prices for the purpose of buying. I'm just not convinced that this is still the right time to buy more.
Art |
