Chart Of The Day & The Biotech Bubble Continues Its Popping!

“MORE “NO SALES” BIOTECH CARNAGE”

By Gary Kaltbaum
@GaryKaltbaum
garyk.com
Fox News Business Contributor
We have written to you on several occasions about the impending disaster in the biotech space. It was a simple thought process. The wonderful human beings at the investment banks had done it again. Back in 99, they brought anything public that had .com attached. All you needed to do was have a website to be brought public. You know what the outcome was. Valuation ALWAYS EVENTUALLY matters.

Fast forward to the last 2 to 3 years. The same geniuses at the investment banks have brought over 200 biotech companies public that have no sales. We repeat NO SALES! When you have no sales and billions of market cap, there will be only one ultimate outcome. DISASTER! We have already seen dozens of names busted wide open. To be fair, we have actually seen a couple of names bought out for ridiculous prices but for the most part, we have seen nothing but downside.

And this morning:

Clovis Oncology (CLVS) closed at $99.43 on Friday. It is opening at $29.25. The story: approval of its rociletinib to treat non-small cell lung cancer will be delayed after the U.S. Food and Drug Administration requested more information…or something like that!

But the real story was before the open today, this stock, this company’s market cap was $3.8 billion WITH NO SALES! We repeat…WITH NO SALES! Not only were they able to do an IPO in 2011 at $13 but the bubble took the NO SALES company up over $100. On top of that, they had been able to do four secondary offerings. Our studies of bull and bear markets and our study of bubbles always finds areas that end up in “ridiculous valuation” territory. In 99, it was a lot noisier because internet names were glamorous. The biotech bubble is not as noisy but is and will be just as bad.

Word to the wise. There are many,many more names out there just like this. When bubbles pop, disaster occurs. We think this is just the start.