Stock Watch: Biotech’s Commercial Laggards Drag On Sector

Biotech Companies Can Remain Unprofitable Years After Product Launches

Some commercial-stage biotechnology companies blame the pandemic for their declining sales and continued losses. While an acquisition by a bigger company might once have been an aspiration, further fundraisings seem to be the more likely outcome.

Stock Watch Image, Andy Smith
ANDY SMITH OFFERS A LIFE SCIENCE INVESTOR'S PERSPECTIVE ON BIOPHARMA BUSINESS

Despite a smattering of biotech acquisitions the NASDAQ Biotech Index (NBI) has fallen by 22% in the year to date and by 31% since its last peak in the summer of 2021. For a while the stock prices of many small biotechnology companies had hovered in bubble territory, simultaneously assuming the mantle of meme stocks and displaying the disconnects between expectations for their wholesale acquisition by big pharmaceutical companies, the fragility of their very early-stage investment propositions and their billion-dollar valuations. Since the bursting of the August 2021 biotech bubble, many investors have sold their holdings, rotating out of the sector and taking with them a more realistic appreciation for the risks and duration of drug discovery.

The compression in technology values at early-stage biotech companies is not the only reason for the NBI’s rerating. Another group...

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