Investors hunt for biotech winners as wider stocks churn

Bloomberg

Biotechnology stocks have helped lead the market lower recently, but investors still appear eager to dabble in some of the industry’s riskiest prospects.
Since hitting a 52-week high on October 1, the Nasdaq Biotechnology Index, the broadest gauge of the industry’s performance, has fallen more than 6.5 percent. Fears that higher interest rates and heightened global trade tensions could harm corporate profits have caused a wider pullback from stocks, with the S&P 500 Index dropping 5.3 percent in the same period.
On top of the economic and political anxieties pushing the market lower, many large biotech companies had already been dragged down by the Trump administration’s campaign to lower drug prices, as well as fears that companies like Celgene Corp. and Gilead Sciences Inc. lack clear successors for older blockbusters that will face cheaper competitors in coming years.
Celgene and other large biotechs like Biogen Inc. and Vertex Pharmaceuticals Inc. have led the Nasdaq index lower in recent weeks. Those companies, as well as industry giant Amgen Inc., are scheduled to report quarterly results this month.
There had been earlier signs that biotech investors were discriminating, snapping up shares of buzzed-about upstarts while shying away from the older standbys. The Nasdaq biotech gauge reached its apex in 2015 — but didn’t top that mark this year even as the broader market hit records. Meanwhile, the S&P Biotechnology Select Industry Index, which includes many smaller firms, hit a record in June and rose 13 percent in the first nine months of the year.
While the Nasdaq and S&P biotech indexes have declined in lockstep this month, investors are still on the prowl for new bets in the sector. Last week, Allogene Therapeutics Inc. soared 39 percent on its first day of trading — the latest in a record wave of initial public offerings by biotech companies this year.
Analysts expect that investors will keep pumping funds into younger enterprises even though many are years away from bringing a drug to market.