The iShares Nasdaq Biotechnology ETF (NASDAQGM: IBB), the largest biotech exchange traded fund by assets, and other biotechnology assets have recently been slumping, but some analysts believe big biotechnology stocks can rebound.
IBB tracks the Nasdaq Biotechnology Index and holds nearly 160 stocks. Biogen Inc. (NASDAQ: BIIB), Amgen Inc, (NASDAQ: AMGN), Gilead Sciences Corp. (NASDAQ: GILD) and Celegene Inc. (NASDAQ: CELG) combine for a significant percentage of the fund’s weight. Those are four of the largest biotechnology companies in the U.S.
“The first quarter is traditionally not a strong one for biotech earnings for a host of reasons—including fewer shipping days, inventory reductions after year-end price increases, weather disruptions, and annual copay resets in many health insurance plans,” reports Teresa Rivas for Barron’s. “While those factors are still in play, favorable foreign-exchange rates and low expectations may make this year an exception.”
Forecasting A Biotech Rebound
Helping the sector’s prospects is a speedier approval process by the U.S. Food and Drug Administration. In 2012, the FDA was given the authority to designate certain drugs as a ‘breakthrough therapy,’ which then allowed that drug to move through the approval processes more quickly,” said Morningstar.
There are supporters of the biotech space. Healthcare stocks are also showing attractive valuations relative to other defensive sectors, which are richly valued. Biotechnology historically trades at multiples that are elevated relative to broader benchmarks, but after last year’s of struggles for biotechnology names, some analysts see value with some big-name biotech stocks.
Related: Catalysts Abound for Biotech ETFs