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Biotech stocks collapse as investors abandon GMO corporations amid global economic turmoil


Biotech stocks

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(NaturalNews) Biotech stocks have finally entered bear market territory, with stocks now down about 22% from their previous high.[1] History is repeating itself, as it so often does. Recall that in 1992 biotech stocks doubled — sometimes tripled — in value in just a matter of months. For a time, these stocks were the sweetheart of Wall Street, but alas, in the spring of 1992 that bubble burst. And in 2000, biotech stocks once again took flight. Between July 1999 and the first months of the new millennium, biotech stocks boomed only to see the bubble burst once again.[2] Like Icarus flying too close to the sun, these stocks were due for a fall. Many are speculating that that scenario is playing itself out again today.

As early as Dec. 2013, speculation about the overvaluation had begun. That year, Don Seiffert of the Boston Business Journal wrote:

During the last two years, the Nasdaq Biotech index has grown by 120 percent as investors have poured money into early-stage drug companies at an unprecedented rate. Over the same two-year period, the Standard & Poor's 500 index has risen 43 percent. It's the first time since 2000 that the two stock indexes have diverged so sharply, and that's given rise to speculation that we could be in the midst of another biotech stock bubble.[3]

On Aug. 17, Seiffert reiterated his opinion about the biotech bubble, with nearly two years' worth of new data suggesting that he was on the right path:

My reason for believing that biotech is indeed in a bubble is that, while recent scientific breakthroughs are fueling an explosion of the number of drugs in development, the market valuations of those drugs depend on the ability of the industry to keep charging high prices. I don't see how the U.S. healthcare system can continue to keep paying those high prices for all the new drugs that will come on the market in the next five or 10 years, even assuming most of them don't actually make it there.[4]

Finally, in July 2014 Federal Reserve Chair Janet Yellen described the valuation of smaller biotech stocks as "stretched." A written report further explained:

[V]aluation metrics in some sectors do appear substantially stretched—particularly those for smaller firms in the social media and biotechnology industries, despite a notable downturn in equity prices for such firms early in the year.[5]

Read more about the the biotech stock bubble and the current market collapse at GLITCH.news.

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