The market for new IPOs in the biotech sector has been incredibly strong and promising over the past years. Many large companies have been outperformed by smaller ones, emphasizing a healthy competition within the sector. Every year, a relatively unknown firm springs up from nowhere, announcing either a public offering or a newfangled way to cure a specific fatal disease.
In 2013, most biotech indices recorded healthy double-digit gains. In 2014, the NASDAQ Biotechnology Index (NBI) finished the year with a 24 percent increase from the previous year, while NYSE ARCA Biotech Index (BTK) was up by 48 percent. Along with this stellar news comes an improved industry valuation from investors, forcing analysts to predict a precarious 2015 for the entire biotech market.
At 11.2 percent, the biotech market is the leading industry on NASDAQ on Monday, surpassing various Internet companies and computer hardware/software producers by a small margin. Economists also attribute to biotech companies the recovery of NASDAQ from the aftermath of the 2000 meltdown. Last year, over 250 biotech companies recorded a surprising more than 500 percent return over the past four years.
Yet amid higher hopes for the sector are doubters. The NASDAQ Composite Index's aggressive advance is not viewed as completely positive by some. It has in fact rekindled a debate that typically occurs when there's a booming market: Investors are wondering if the current stock value is inflated.
Heath Lukatch, a partner at Novo Ventures, expressed his anxiety over the unstoppable IPOs in the sector. "I am nervous. These generalists aren't going to be here forever, biotech will go out of favor at some point in time. One or two failures won't rattle the markets, but a string of failures across high-profile companies could be damaging," he told Bloomberg.
For Roche Venture Fund head Carole Nuechterlein, the boom is a clear indication that a bubble is looming, especially now that the trend has changed in terms of IPO timing. In the past years, it is not very common for a biotech firm to go public earlier in the drug development process. But most companies now go public even though they're not yet through with the pre-clinical phase or phase 1 trial.
But the good news is that the sudden increase in stock prices has been complemented by a laudable pace of scientific achievements. Since 2005, many new methods for treating fatal diseases like cancer, hepatitis, and various disorders are introduced to the public, while some of them are helping the entire medical industry for the better, and some on its way to commercial production.
One of the newest additions to the growing sector is Nascent Biotech, Inc. (OTC: NBIO). The California-based company believes that it can produce a future immunotherapy for different types of cancer by developing human Monoclonal Antibodies (mAb's). Recently, the company obtained an SBIR Grant for brain cancer therapy. This will be used for initial development of tobacco plants for improving its lead candidate biopharmaceutical Pritumumab, a monoclonal antibody for the treatment of brain cancer.
The speculations on the possible bubble remain blurry to most experts. More biotech deals-both mergers and acquisitions--will kick off this year, and the market will certainly go bigger. But, as experts would suggest it, "the sector has not reached its peak yet." Hence, for the investors, it's high time to play the game while there's still a game to play.