Life Sciences Lawyer: Fed's Yellen Is Wrong About Biotech Valuations

Wednesday, 13 Aug 2014 11:41 AM

By Michael Kling

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
A report accompanying Federal Reserve Chairman Janet Yellen's Congressional testimony in July warned that valuations of biotech firms are "substantially stretched." Some experts say she's got it all wrong.

"If you are a sophisticated biotech investor, a lot of these guys, the Wellingtons, T. Rowes, Fidelitys — these guys are incredibly sophisticated," Asher Rubin, at partner and co-head of the Life Sciences Industry team at the law firm Hogan Lovells, tells Fortune. "They know what they’re looking at overall."

While the S&P 500 index has increased 5.1 percent since January, the S&P biotechnology index has jumped 13.6 percent. Biotech and pharmaceutical firms had 53 initial public offerings this year.

Editor’s Note:
New Warning - Stocks on Verge of Major Collapse

Biotech stocks can certainly be risky. Many are not making money and are working on unproven drugs that lack regulatory approval.

However, the drugmakers now have better data on the drugs in development than in the past, a game changer for biotech investors, according to Fortune.

Kite Pharmaceuticals raised $146.6 million in its June IPO, exceeding its $115 million goal. Its stock skyrocketed approximately 24 percent, based on its CAR-T drug that's designed to attack cancer tumors.

Comparing results from different companies is key for predicting a drug's odds for successes. Although the drug has been in development since the early 1990s, testing of the drug by Kite and similar drugs of other biotech firms, including Novartis and Juno Therapeutics, now shows investors the drugs can work and may reach the market, Fortune reports.

While the new firms are often seeking IPOs to gain funding, mergers and acquisitions will become more popular as FDA approval becomes more likely.

"As these smaller companies progress, they will strike licensing and collaboration deals," Rubin tell Fortune. "We’ll probably see big pharma reap the rewards of what the small biotechs have been doing."

Other experts believe Yellen's warning about small social media firms being overvalued was also off the mark. After her warning, CNBC reports, social media firms announced second-quarter earnings that generally beat expectations.

Cantor Fitzgerald web analyst Youssef Squali tells CNBC that 84 percent of Internet companies reporting second-quarter results beat revenue forecasts.

Still, many agree with Yellen.

"It feels a little bit in some of the markets, like social media and the cloud area, a little bit like the bubble 10 years, 15 years ago," Oracle Chairman Jeffrey Henley tells CNBC.

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

Related Stories:

© 2014 Moneynews. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
You May Also Like

WSJ's Mattich: The Currency War is On

Sunday, 23 Nov 2014 23:26 PM

With many economies outside the United States struggling, the European Central Bank, the Bank of Japan and now the Peopl . . .

USA Today's Waggoner: It May Be Time to Buy Gold, or Maybe Not

Sunday, 23 Nov 2014 20:17 PM

With gold having dropped to a four-year low earlier this month, is now the moment to jump in? John Waggoner of USA Today . . .

Yale's Roach: China Wrestles with 'Downside Pressure'

Sunday, 23 Nov 2014 19:56 PM

China's interest-rate cut Friday shows it seeks to keep economic growth from slipping below 7 percent, says Stephen Roac . . .

Most Commented
Top Stories

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved