Among the many investing sectors hit hard in ’07, biotech was not immune. The analysts we spoke to this week said that 2007 was a very tough year for biotech, leading many investors to pull out of the space.
We asked two of them, Dr. Jason Kantor of RBC Capital Markets and Dr. Thomas Shrader of Rodman & Renshaw, what it would take to get investors to look back at Biotech in ’08:
Dr. Kantor: I think we need to see more clinical successes. We have already begun to see some clinical trials coming off of this year with positive reads. Biogen (BIIB) and Genentech had positive results for Rituxan in rheumatoid arthritis, and Genentech and Roche (RHHGY) reported positive results of Avastin in metastatic breast cancer. One of the major catalysts for some of the big stocks as well as the little stocks is major Phase III readouts. Those are the kinds of events that can get investors more confident in the market.
Dr. Shrader: I will answer the question treating biotech as just another tech sector. What drives people into these riskier stocks is a need for differentiated returns. The people who comprise the buy side essentially compete against one another. As low risk stocks become more and more expensive and the potential for return gets worse and worse, it forces people to look for investment returns in other places. I think the need to differentiate returns is one of the things that drives non-specialists to look into biotech. In addition, one of the most common ways for people to turn back to the sector is for something really miraculous to happen with a drug or technology or platform — something that gets people really excited about the whole sector. Non-specialist investors hear pieces of the news start to creep back in emotionally and monetarily.
For the full Biotech report, including stock picks and interviews with CEOs from a wide variety of biotech companies, click here.
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