×Close Onze kantoren Brugge Maatschappelijke zetel Rijselstraat 2A 8200 Brugge T +32 [0] 50 33 33 61 F +32 [0] 50 34 16 30 RPR Brugge BTW 0405 156 033 FSMA-inschrijvingsnummer 063999a Privé parkeerplaats: Rijselstraat 2A Openingsuren: ma - vr: 9u - 12u 14u - 16u30 Mail ons Gent Kortrijksesteenweg 930 9000 Gent T +32 [0] 9 265 71 40 F +32 [0] 9 223 09 07 Privé parkeerplaats Openingsuren: ma - vr: 9u - 12u 14u - 17u Mail ons Brussel Terkamerenlaan 33 bus 3 1000 Brussel T +32 [0] 2 669 07 41 Mail ons Menu Home Weghsteen Publicaties Compliance Corporate Vacatures Evenementen Sponsoring aandelenopties contact Weghsteen Brugge Weghsteen Gent Weghsteen Brussel discretionair beheer Beleggingsadvies patrimoniaal beheer institutioneel beheer Publicaties Pers Blog Nieuwsbrief Inzichten blog Blowing Bubbles in Biotech Biotech has been hot the past couple of years. Very hot. The Nasdaq biotech index is up almost 500 % since the 2009 low. And valuations are expensive. No one knows exactly when this thing will collapse. That’s the problem with bubbles. No one knows for sure. For example, Janet Yellen described the biotech valuations as ‘stretched’ in July 2014. The index is still up 30% since then; another sign that central bank advice is as good as any other. However, she will probably be right in the long run. Biotech is a momentum investment. Current valuations are completely disconnected from fundamentals again. Underlying results don’t matter. It’s a technical thing. If the trend is up, the trend is up. Otherwise it’s down. No questions asked. That’s how the majority of investors look at it. Fear and greed in its most simplest form. Stop-losses are advised and long term investors should take into account the following points: There is an overwhelming majority of low quality biotech IPOs on the market (no track record, losses, huge valuations on small stocks,…) Some executives from big pharma are starting to get worried as well. Roche Holding chief recently claimed: “The more time goes by, the more I am worried that this whole thing will collapse at some point. The number of biotech IPOs is higher than in 2000. Around 60% of IPOs in 2013 en 2015 were companies with drugs in phase 1 or phase 2 trial. To give you an idea of the probabilities of success: around 5% of drugs in phase 1 make it to the market. For phase 2 the probability is 12%. Cheap debt and low interest rates keep the bubble alive. Big pharmaceuticals keep bidding ridiculous prices financed with low interest rate debt in the hope of finding the next winner. The Nasdaq biotech index is currently trading at 9 times price to sales and 6,5 times price to book. Nasdaq Biotech index – price to sales – price to book Here are the stats for a couple of popular Belgian Biotech Stocks When investing in biotech, you pay for hope. You don’t pay for current or past results. You pay for the hope of exponential sales growth that eventually will translate in positive earnings and earnings growth. To give you an idea: Belgian biotech stocks trade at 30 times average yearly sales. To put things in perspective: if the companies wouldn’t have costs and taxes (personnel, research and development, marketing, sales costs,…) it would take around 30 years to get you investment back if all sales would be paid out as dividend. We are still searching for a zero-cost company… Most biotech are still operating with a loss. People pay for hope. This is translated in the expected sales growth you can see in the last column for some of these stocks. Keep in mind, some biotech stocks succeed and deliver exponential growth with medicines that turn out into huge blockbusters. Most do not however. The most sensible thing to do when investing in biotech? Keep diversified Remember that the trade is a momentum trade. Fundamentals hardly matter. News flow matters and the trend matters. That’s it. When the tide turns, have a method to get out. Terug naar overzicht Hou mij op de hoogte van toekomstige publicaties Hou mij op de hoogte van toekomstige ... BlogberichteninzichtenEvenementenPublicaties (nieuwsbrief en persberichten) © 2014 - 2016 Weghsteen nv Deze site maakt gebruik van cookies om de site optimaal te laten werken. Cookies zijn kleine bestanden die gebruikt worden om de instellingen van deze site te bewaren. Cookies vertellen ons niet wie je bent. Ik ga akkoord