The Biotech bubble inflates!

Back in 99, any company that announced a website saw their stock soar. Companies were changing their names adding .com to their name. Mutual funds changed their names to “internet.” Unfortunately, many of those companies had squat and are now nowhere to be found.

Fast forward to today. Over 130 Biotech companies have been brought public in the past couple of years with the number getting larger and larger. Most all have no sales with many not even in trials yet. THEIR STOCKS ARE SOARING. $2 billion market caps are going to $4 billion. Announcements of phase 1 trials see stocks soar…even though a drug could not come to markets for a long time. Any announcement is lifting these stocks. Even secondaries are lifting the stocks.

For example, yesterday, JUNO announced a huge loss and a bigger than expected cash burn. What did the stock do? It gapped down…turned around and finished up over 15% on monstrous volume. Total sales for the company…as John Vernon said in Animal House…”0.0.” Market cap for JUNO? $4.4 billion.

The BIOTECH index is starting to go parabolic and that’s after a long run. One does not know when or where it stops…and for all anyone knows, could be much higher. The good news is names of substance, with strong sales and earnings are doing well also. We’ll let you decide in what sandbox to play.