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

Biotech Stocks: A Year in Review

NEW YORK ( TheStreet) -- Known for its above-average risk and steel-nerved investors, the biotech sector has piled up year-to-date gains of close to 52% -- one of 2013's best-performing areas of the market. That's even with a slight pullback since the summer.

Let's review the year in biotech.

My first takeaway from 2013 is this industry didn't see many merger and acquisition announcements, at least not relative to the past two years. Amgen (AMGN) completed a $10.4 billion deal for Onyx Pharmaceuticals, a disappointing move that was pretty much it for biotech M&A this year. This was despite the fact that many experts noted how primed Teva Pharmaceuticals (TEVA) was for a takeover.

It's possible most mergers are being postponed for 2014, including the much-rumored deal between AstraZeneca (AZN) and Forest Laboratories (FRX). It's also possible that management of these companies are beginning to alter their prescriptions for growth. We shall see.

This year, 2013, will go down as the year when the biotech sector -- with around 220 new publicly traded companies -- emerged from relative obscurity to raising almost $50 billion in investment capital.

The market hasn't been flooded with this much interest in biotech IPOs since 2004.

Now I'm not going to venture into the so-called "doom-and-gloom" territory. But the Renaissance IPO  (IPO) exchange-traded fund, which tracks several biotech stocks, has posted a roughly 50% gain. I have to ask: What reasonable level of outperformance will there be in 2014? All the stocks can't be winners.

I'm not suggesting these companies are doomed to fail. But I would caution investors about riding the wave of all of this IPO enthusiasm. Many lockup expirations have yet to arrive, so insiders might still flood the market with shares when they are finally allowed to sell. You don't want to be the one caught holding the bag.

Another way to play the demand would be to diversify some capital into, say, Novo Nordisk (NVO), the largest biotech name on the market according to market cap. With gains of (only) 8% on the year, I believe Novo can be a relative outperformer in 2014. While Novo may not be cheap relative to Amgen, you would be hard pressed to find a safer bet from a margin and profitability perspective.

1 of 2

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
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
JNJ $99.96 -0.62%
MDVN $125.94 -0.54%
GOOG $551.51 -0.70%
TSLA $233.28 0.75%
YHOO $44.29 -0.16%


DOW 18,003.64 -34.33 -0.19%
S&P 500 2,103.62 -5.30 -0.25%
NASDAQ 5,040.0650 -20.1810 -0.40%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs