Biotechnology Stocks Gaining Investor Favor
Investors are showing rekindled interest in biotechnology companies for the first time in two years, as new drugs produced by genetic engineering head toward the marketplace.
“For a while, people had given up on the technology and the industry,” said Jeffrey Casdin, a senior analyst at Oppenheimer & Co. specializing in biotechnology. “Now both are reviving as the products become more real.”
“Biotech stocks are hot,” added one trader, citing the group’s long-standing doldrums.
In the first quarter, Casdin’s index of 64 publicly held biotechnology stocks rose 12.3%, compared to a rise of 6.2% for Standard & Poor’s index of 500 companies and a 6.6% gain in the NASDAQ composite index of over-the-counter issues.
Although analysts measure the biotechnology industry in different ways, all reported that their estimates had risen significantly.
Stocks of the top 10 biotechnology companies jumped 22% in the first quarter, according to PaineWebber Group’s Linda Miller, while Goldman, Sachs & Co.'s Jeffrey Swarz said an index of 18 leading biotech groups climbed 14% during that time.
“I see it as a progression,” Swarz said. “Biotechnology is moving from entrepreneurial firms to companies with real products and finally to small, niche drug companies.”
Swarz predicted that about 12 biotech companies will survive and thrive in the field, a development expected in the next year to 18 months.
Miller said she recommended shares of Amgen Inc., Biogen Inc., Centocor Inc. and Genzyme Corp.
More than 400 U.S. biotech companies are struggling to apply sophisticated genetic engineering technologies that could apply to fields ranging from cancer treatment to waste management. So far, the biotech rebound has focused mainly on the industry’s leaders.
So far, only large institutions have invested in the revival of biotechnology stocks. But analysts said the small investor is destined to follow suit later this year.