The biotech sector appears to be in the midst of a classic equity bubble, with hype, instead of fundamentals, driving stock prices. To be specific, there are a number of mid-cap biotechs with no revenue to speak of, and deficits reaching into the billions, that have recently attained multi-billion dollar market caps based solely on the "potential" of their flagship drug candidates. And when these drugs do finally reach the market, fundamentals kick into overdrive, acting like a black hole on share prices. Arena Pharmaceuticals (ARNA), Avanir Pharmaceuticals (AVNR) Dendreon (DNDN), Horizon Pharma (HZNP) are just a few examples of this widespread phenomenon in the biotech sector.
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