Is the Biotech Party Over?

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By Jacob Maslow

lab assistant checks petri dishOne of the main reasons why the NASDAQ 500 has gone crazy recently is the fact that its weighted heavily towards biotechs. Biotech stocks have been on fire lately. While the general pharmaceutical sector has been rather lackluster because of the shortage of blockbuster drugs, a lot of the slack in the pharmacy space has been taken over by the speculations in biotech stocks.
In fact, it didn’t take much for a biotech stock to skyrocket. It only needs to report that it has a drug that hasn’t been rejected in clinical trials yet and is proceeding through different stages of clinical trial. Unless that drug is cut off at the knees because of bad findings or the drug is aimed at a very, very rare condition, this is all you need for a biotech stock to explode and boy, biotech stocks have been exploding lately. In fact, they have been doing so well that the NASDAQ recovered its fifteen-year record high recently.

Unfortunately, what goes up must come down and biotech stocks have been going through some turbulence recently because of the fact the drug approval process among different benchmark biotech companies has hit a snag. I am of course talking about Gilead Sciences and Vertex Pharmaceuticals. Moreover, a lot of traders who have made money off biotechs are looking for any kind of news that they can use to unload their positions. Put two and two together and you can see why there are a lot of turbulence and volatility in this sector. Don’t expect this to change anytime soon.

If you are in biotechs right now, pay careful attention. You don’t want to get caught in a middle of a crash.

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