Biotech has been beset in recent months: negative media coverage, the American election, and some disappointing clinical trial results contributed to a 25 percent drop in the industry. But if yesterday is any indication, things may be turning around for the sector.
Biotech has been beset with troubles in recent months: negative media coverage, the American election and some disappointing clinical trial results contributed to a 25 percent drop in the industry. But if yesterday is any indication, things may be turning around. The iShares Nasdaq Biotechnology index (NASDAQ:IBB) gained three percent yesterday—its best performance since the start of the summer.
What triggered the sector’s sudden upswing? It may have something to do with recent mergers and acquisitions. Horizon Pharma (NASDAQ:HZNP) said Monday that it would acquire biopharma company Raptor (NASDAQ:RPTP) at the cost of nine dollars per share. Horizon’s stock rose nine percent, while Raptor was up by 20.
Meanwhile, numerous IBB holdings performed well: Amgen (NASDAQ:AMGEN), Vertex Pharmaceuticals (NASDAQ:VRTX) and Shire (NASDAQ:SHPG), for example, all saw gains over three percent during the course of the day.
Experts advise that the sector may gain additional momentum, depending on forthcoming clinical trial data. According to CNBC’s Meg Tirrell, Kite Pharma (NASDAQ:KITE), Eli Lilly (NYSE:LLY) and Sarepta Therapeutics (NASDAQ:SRPT) are three biotech stocks to watch. The first two are in late stage clinical trials, while Sarepta is currently awaiting FDA approval for a muscular dystrophy drug.
Still, biotech investors may want to proceed with caution. “We are in the green today, however [it’s] not doing so well for the year,” Tirrell acknowledged on Monday. In fact, biotech has been bogged down ever since the start of 2016.
A tweet from Hillary Clinton—”Price gouging like this in the specialty drug market is outrageous. Tomorrow I’ll lay out a plan to take it on”—sent biotech stocks plummeting. Negative media coverage around figures like Martin Shkreli and J. Michael Pearson also affected stock value.
Meanwhile, the biotech sector seemed short on good news: George Budwell, writing for The Motley Fool, argued that disappointing clinical trial results from several biotech companies contributed to the industry’s weaker performance. Interestingly, one such disappointment came from Sarepta—which Tirrell just named a stock to watch.
Clearly, there is still a ways to go in this industry’s recovery, despite gains made on Monday. Is this the start of an upward trend? Will biotech be bullish again? You can bet we’ll be keeping a close eye on this sector in the months ahead.
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Securities Disclosure: I, Chelsea Pratt, hold no direct investment interest in any company mentioned in this article.