Vervolg:
Lately, the sector has been pressured by legislative efforts that have created uncertainty about some biotech companies’ ability to reap big profits. That has sparked selling by generalist investors, or those with less experience trading volatile biotech shares, traders say.
What’s more, a flood of companies in the sector have gone public this year, with 91 biotech IPOs compared with an average of roughly 46 annually in the past five years, according to Dealogic. Many haven’t even started human drug trials.
Acquisition activity—traditionally a meaningful source of returns—was less robust than expected, too, some investors say. And safety scares, including deaths of several study subjects, have dealt a blow to gene-therapy efforts that biotech funds typically back. Some funds also have been burned by betting against the S&P 500 as a hedge against their biotech holdings, traders say.
Some biotech fund managers are sounding notes of optimism. They see the broad selloff as indiscriminate and note that past declines have been followed by robust rallies. Several high-profile Covid-19 drugs could be on the way and falling valuations may boost merger volume in 2022. A Dec. 1 SVB Leerink research note estimated the biggest U.S. and European biopharmaceutical companies could have more than $500 billion of cash by the end of 2022 to use for deals and other activities, with new debt capacity significantly adding to their firepower.
Firms including San Francisco-based EcoR1 Capital, a rare biotech investor whose hedge funds have made money so far this year, are calling in cash from clients to put into newly cheap stocks, according to people familiar with the matter.