But I'm not uniformly bearish on biotech. If you have a breakthrough in a big market, and if the costs of production aren't out of line, you can be a winner here.
So take a look at Regeneron (REGN).
The big news here is a first-stage study of REGN727, a compound for cholesterol control, now going through a Phase One study with funding from Sanofi-Aventis (SNY), the French drug giant.
REGN727 is one of a new class of cholesterol drugs dubbed "PCSK9 Inhibitors," because they inhibit production of a protein that can bind to LDL "bad" cholesterol and keep the liver from processing it out of the system.
Statins, the present drug of choice in this area, work by controlling an enzyme that is used to produce these compounds. These drop all cholesterol levels. But scientists know there are two kinds of cholesterol - HDL and LDL - and only the latter is really implicated in heart disease. It's the balance between these two types, not just the absolute cholesterol counts, that puts you in the heart attack waiting room. (Full disclosure. I have taken statins for 12 years.)
Past efforts to control LDL through time-released niacin therapy or drugs like Zetia that operate outside the liver, have not proven fruitful, in terms of lowering heart attack rates. As time has gone by, and as statins have gone off-patent, side effects have been found to be profound, especially at higher dosages.
Regeneron is not the only company on the hunt for PCSK9 Inhibitors - Amgen, Merck Novartis and Pfizer are all in the hunt - but Regeneron may find itself with first-mover advantage thanks to a "dramatic" study just published in the New England Journal of Medicine.
Regeneron is not a one-trick pony. Its Eylea vision drug for macular degeneration was approved last year, and could deliver $300 million in sales this year. Its other-approved drug, called Arcalyst, is in trials for treatment of gout, another mainline disease. REGN727 is one of 13 drugs it has in some form of clinical trial.
In other words, this is a company aiming to treat mainline diseases, with a track record of success, and a strong pipeline.
Of course, like any company primarily involved in seeking to create new drugs, Regeneron remains a speculative investment. It has yet to make a profit, and while the rate at which it's burning cash is finally going down it's still taking in only a little more than $1 for every $2 it spends. But with a market cap of $10.9 billion, many like it because it has enormous growth potential and could be subject of a take-out by a larger company at any time.
If you want to speculate in this area, if you have money you want to lay on the line that you can afford to lose, Regeneron may be worth a flier.