BOSTON (TheStreet) -- I'm back at work after a nice, 10-day vacation. I had great time away from biotech stocks, thanks for asking.
It doesn't look like I missed much in the news department, but valuations of biotech stocks are nearing a 10% decline that would put them in correction territory.
It's August, the one month of the year other than December when investors take a lot of vacation time. With the Wall Street summer doldrums upon us, it's hard to draw any conclusions about whether the sell-off in biotech stocks is durable or just the temporary result of investors taking time off. We'll get a better sense of where the biotech sector stands after Labor Day.
The high-altitude view of the biotech sector doesn't look too bad. The iShares Nasdaq Biotechnology Index (IBB) is up 21% for the year, outperforming the broader markets by a wider margin. But it's down 8% from its all-time high set in the middle of July, which isn't great but still doesn't set alarm bells ringing.
You need to look more closely at individual biotech stocks, particularly those in the speculative, small and mid-cap stocks buckets, to see the real hit to valuations this summer. These biotech stocks have been huge winners for healthcare investors this year but are now down significantly from their 52-week highs.
Bluebird Bio (BLUE - Get Report), I'm looking at you. As of Tuesday night's close, the beloved gene therapy developer's stock price is down 34% from its 52-week high on no fundamental change to its pipeline of blood disorder drugs. [Insiders did sell a lot of stock, which probably contributed to the sell off.]
Cancer immunotherapy stocks are also especially weak. Juno Therapeutics (JUNO) is down 40% from its 52-week high. Kite Pharma (KITE) is down 35%, while NantKwest (NK) is off 37% -- both from their 52-week highs.
Investor optimism propelled all of these developmental-stage biotech stocks to sky-high valuations despite very little "real" clinical data. [Revenue? Profits? You must be kidding.] We may finally be reaching the point where risk matters, but again, it's hard to know for sure until the summer ends.
It is interesting to note that large-cap, profitable biotech stocks are not suffering this summer like their more speculative cousins. Gilead Sciences (GILD - Get Report) is only down 5% from its 52-week high. Celgene (CELG - Get Report) and Amgen (AMGN) are 8% off.
Even Vertex Pharmaceuticals (VRTX), which many investors still consider to be a speculative stock but on the fast track to profitability, is only down 3% from its 52-week high.