This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

A Time to Test Biotechs' Strength

NEW YORK ( The Deal) -- Bubbles are colorful, shimmering things. And yet they're ephemeral and can vanish in a moment, leaving behind a sticky residue. The bigger the bubble, the bigger the mess when it bursts.

That's what has some investors in biotechnology companies concerned right now. Biotechs are raking in the dough after a long period in which they were pretty much frozen out of the initial public offering market. Plus valuations are at a high, which, if they deviate too much from the underlying asset's intrinsic value, can create another kind of bubble.

Clearly, the ice that formed following the 2008 banking crisis has melted. In all of 2012, there were 12 health care IPOs, according to IPO tracker Renaissance Capital, compared with 16 in the first half of this year. An additional 15 health care firms had gone public in the early weeks of the second half.

And several of those biotech IPOs have been priced higher than expected, becoming oversubscribed, or soaring in value on the first day of trading.

"The biotechs were generally well received, with an average total return of 36%. Two biotechs, bluebird bio (BLUE - Get Report) and Epizyme (EPZM - Get Report), experienced a first-day pop of over 50% for the first time since 2004," Renaissance Capital said in a second-quarter report. Such a cycle builds upon itself, the report said. "With 16 biotech IPOs completed year-to-date, 2013 is on track to be the most active year in over a decade. We believe the intersection of several industry trends, including an increased number of FDA drug approvals, a rise in risk tolerance among IPO investors, a decline in nondilutive funding from the government, and venture firms' push to liquidate holdings, has driven this revival."

Consider the example of synthetic gene sequencer Intrexon Corp. (XON - Get Report), of Germantown, Md., which began trading on the New York Stock Exchange Aug. 9 under the ticker symbol XON. Sources said it was 15% to 20% oversubscribed and sold 11.5 million shares at $16 apiece, clearing about $160 million. In addition, it traded on its first day up more than 50%, for a new market cap of about $2 billion.
1 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
ONXX $0.00 0.00%
AMGN $154.25 0.05%
BLUE $38.70 -4.98%
EPZM $9.07 -4.53%
HTBX $0.58 -4.96%


Chart of I:DJI
DOW 17,660.71 +9.45 0.05%
S&P 500 2,050.63 -0.49 -0.02%
NASDAQ 4,717.0940 -8.5450 -0.18%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs