The field of pharmaceuticals is very well established and often is considered to be a very defensive sector. As such, investors flock to the drug sector in times of uncertainty. But what about the biotechnology sector of health care? This is the group that may discover the next cancer or heart disease treatment, but investors are getting to find out the hard way all over again that the biotech sector is not immune from uncertainty, nor is it immune to stock market gyrations.
The infighting over the federal government closure and the debt ceiling being met in just over a week are acting to create ample uncertainty. Even the social media sector took a hit today. All these sectors have in common is that both are up massively in 2013.
To make matters worse, this day in biotech is almost funny. Pretend that stocks are down 10% rather than less than 10%, and imagine the panic. But now think of a $1 billion company in biotech or emerging pharma that announces a significant milestone in the quest for a cure of cancer. That stock would likely be up massively. Still, the market and uncertainty do prevail over the group as a whole.
The iShares NASDAQ Biotechnology (NASDAQ: IBB) is down 3.9% at $199.61 against a 52-week range of $125.63 to $213.78. This ETF is a whopping 45% year to date, and that even includes Tuesday’s drop. The losses in the major constituents are atrocious as well. Here are the current drops impacting the sector as a whole:
Amgen Inc. (NASDAQ: AMGN) is down 2.6% at $107.31, but this drop is less because the stock is “only” up 26% year to date if you include Tuesday’s sell-off. Amgen is worth some $81 billion in market cap. Its sales are expected to be over $18.3 billion in 2013.
Biogen Idec Inc. (NASDAQ: BIIB) is down 3.8% at $227.50, but this stock is up 55% year to date even including Tuesday’s drop. Biogen is worth $54 billion in its market cap and it is expected to have sales of over $6.8 billion in 2013.
Celgene Corp. (NASDAQ: CELG) is down 3.2% at $148.88, and it is up 89% so far in 2013. Frankly, this stock could have been down worse considering the nearly four percent drop in the biotech ETF. Celgene is now worth over $61 billion in its market cap, while it is expected to have sales of $6.36 billion in 2013.
Gilead Sciences Inc. (NASDAQ: GILD) shares are down 3% at $59.90 and its gains so far in 2013 are over 63%. Gilead is in the quest for the $100 billion mark in biotech, and its market cap is now almost $92 billion. Gilead’s market value is almost $92 billion, also putting it in the $100 billion race for biotechs. Gilead is expected to have sales of almost $10.8 billion in 2013.
Regeneron Pharmaceuticals Inc. (NASDAQ: REGN) is down 3.5% at $288.50 against a 52-week range of $136.13 to $319.83. Its shares are up about 69% year to date. Regeneron is now worth some $28 billion in market cap and it is expected to have sales of almost $2 billion this year.
The reality is that if there is any slack in funding to these companies, it is because something very wrong has taken place. You have not really seen anything drastic, at least not yet. This is just another sell-off of a high-flying sector. With the NASDAQ Biotech ETF up 45% even after the drop, that is a high-beta sector for 2013 for sure.