Investors seeking a shot of medicine for portfolios are looking to biotech stocks.
Shares of biotech companies are up 9.3% this year, powered by a renaissance in science and regulations helping drugs go from test tube to blockbusters in record time. Biotechs are on the verge of selling, this year, breakthrough drugs that treat some vexing human ailments, including hepatitis C, multiple sclerosis and cancer.
"It's a real biotech bull market," says
Biotechs' stellar performance is driving the health care sector, up nearly 8% this year, the best of the 10 sectors in the Standard & Poor's 500. Investors' appetite for biotech is powering the best start to the year for IPOs since the dot-com boom. So far, nearly half the year's IPOs are biotechs.
The biotech stock boom isn't just about potential, but it's a reflection of a major shift in the industry and its rising stature as an engine of market growth, such as:
•Breakthrough treatments are about to go on sale. The biotech business is led by three large companies at the cutting edge of treatments.
•Solid visibility into the future. Biotech investors are seeing that improvements in drug science and testing are leading to more bankable results. The number of biotech drugs that fail in testing is plummeting, and the results are lucrative. Gilead's hepatitis C drug could result in the company seeing revenue jump from
• Faster regulatory procedures. Promising treatments are getting a fast-track to approval, Yee says, easing investors' nerves about drawn-out clinical tests.
That's not to say biotechs aren't risky. Most stocks aren't cheap.
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