April through June are the hottest months of the year for biotech stocks in terms of news flows. Most of the major scientific conferences are held in this time frame, providing investors with critical data points with which to determine valuations and recalculate odds for success. Once this gaggle of conferences passes in a couple of weeks, things slow down considerably in the sector.
Portfolio managers and research teams for biotech and health-care funds spend the majority of their time on the road during this period. Lots of chatting about positions, positioning, and portfolios occurs over various beverages in the after parties and after-after parties at these conferences.
Based upon these conversations, everyone is short biotech, has their positions hedged, has raised cash, or in some other fashion has limited their exposure to biotech stocks. One look at the charts for the iShares Nasdaq Biotechnology Index ETF (NASDAQ:IBB) and the SPDR S&P Biotech ETF (NYSEARCA:XBI) pretty much shows you when this happened. I have met no portfolio manager and have heard of no portfolio manager who expects biotech to go up over the summer.
If the market perversely charts a path of maximum frustration, what does this unanimous negative opinion on biotech stocks mean for summer biotech valuations? I don't have an answer for you, but I can tell you we discuss this every day at Alpine BioVentures.
Biotech this morning is doing well due to Merck's (NYSE:MRK) bid for Idenix Pharmaceuticals (NASDAQ:IDIX) for a hefty premium in a competitive bidding war against (apparently) Johnson & Johnson (NYSE:JNJ) and AbbVie (NYSE:ABBV). Idenix closed at $7.23 on Friday and was bought for $24.
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