Media Thread, page-5909

Interesting article on Biotech shares.

Check Up: Biotechs are getting crushed, but expert says we shouldn’t dismiss them (msn.com)

Check Up:Biotechs are getting crushed, but expert says we shouldn’t dismiss them

EddySunarto - 10h ago

· Someexperts say the biotech market is over-saturated, which has led to its downfallin the past 24 months

· Butanother expert says smaller, ‘obscure’ biotechs should not be dismissed

· Stockheadlists the best and worst performing ASX biotech stocks over the past week andmonth

The healthcare sector has been in a year-long form slump. In the pastsix months alone, the S&P/ASX 200 Health Care [XHJ] is down by 12%.

In the US, one in five listed biotech companies are trading for lessthan the value of their cash. In other words, the market is placing zerovalue on the actual business.

So what’s going on with biotech stocks?

According to head of biotech research at Mizuho Securities, Salim Syed,the sector got too frothy too quickly during the height of the pandemic.

“Biotech was seen as the solution to the pandemic and the problems wewere seeing in the market at the time,” Syed told CNBC.

“What happened was that biotech companies essentially ended up gettingfunded very easily, and they were converting over to public markets tooeasily.”

“And what we’re seeing right now is a reversal of that,” Syed said.

He added that many of the biotechs which converted from private topublic in the past two years have disappointed, and are yet to provide anyviable clinical data results.

Toosaturated

So is this a knee-jerk reaction, and is there a risk that good biotechstocks are getting dumped as part of a wider market selloff ?

“Yes we are going through that process of trying to figure out whichstocks are of higher quality and deserve investor capital, and which deserve tobe weeded out,” Syed said.

“Right now, we probably have about 800 or so biotechs publicly traded(in the US), which if we only go back three years ago, it was only about halfof that.”

Asset manager Oppenheimer’s healthcare analyst Jarred Holz agreed,telling CNBC there will be “self corrections” ahead.

“There are 500 or more companies with an enterprise value of $100million or less, and that’s close to 60 per cent of this entire category,” Holzsaid.

Many believe that some of these names might get locked out of thecapital markets, and sooner or later they will no longer cease to operate.

“You could almost define those companies as either non-investable ornon-viable, depending on where their programs are,” said Holz, adding that thesector almost needs to go through this self-cleansing process in order toredefine itself.

“They have to move on from either the program they were starting with,or move on from being a company at all.”

Whybiotechs could still be a good investment

Nicolas Rabener of Factor Research, however, argues thatpartnerships with pharma giants could make some of those smaller biotechs lookmore obscure than they really are.

“The obscurity of biotech companies is partially explained by many ofthose having distribution agreements with the large pharmaceutical companies,which puts their own brands into the background,” Raebner said.

“Furthermore, the biotech sector acts as an incubator for thepharmaceutical industry where startups with attractive drugs in development areoften acquired, thus ceasing to exist as publicly traded stock,” he added.

Raebner believes that over the long run, biotechnology will always playa part and have a large impact on our lives.

“The potential is there and has always been, but it just has not been agreat bet for investors so far,” added Rabener.