One of Wall Street's riskiest equity bets is back. Some say its one of the next booming sectors to take off. The biotech boom
With the rapid development of medical breakthroughs and treatments, many market investors have poured over $700 million dollars into newly floated companies on the stockmarket, in an attempt to cure major diseases like cancer, MS and hepatitis C.
This is causing a major boom, when you look at some of the charts. Biotech investments were once seen as highly speculative and very risky, however in 2013 with the rapid development of global technologies research say it is not a matter of IF they come up with the next medical miracle but on WHEN!?
In 2013 there are 10 newly listed companies on the stockmarket, and more floats are coming and investors are keeping a keen eye on these.
With industry data showing on average that just one in ten biotech companies successfully launch a drug product, the risks are high. But the right investment in a company promising a breakthrough can lead to outsize returns for early investors.
Mad Money host Jim Cramer is on the hunt for medical plays that could inject it with profits.
The leap in listings comes as publicly traded biotechnology companies have outperformed. The Nasdaq Biotechnology Index has risen 32 per cent since the start of the year, eclipsing its previous record high set during the dotcom era and far outgaining the S&P 500's 16 per cent rise.
The interest has come from a broad base of risk-seeking investors and has been fuelled by the knock-on effects of global monetary easing. Bankers said it had never been easier to bring a biotech company to market, with deals pricing at unusally strong levels.
Buy-side investors ranging from hedge funds to institutional investors were reviewing investment opportunities in the sector, bankers said. The deals have typically been the domain of niche, specialist firms.
This risk-taking has allowed companies in earlier stages of the drug development process, including some that have not had a clinical trial, to come to market.
"A general rule that a biotech company had to have hit a certain phase of progress is no longer true," said Michael Zeidel, a capital markets attorney at Skadden, Arps, Slate, Meagher & Flom. "There's certainly more deals getting done now from companies in the earlier stages of drug development."
The sector has also been one of the biggest beneficiaries of the Jumpstart Our Business Startups (Jobs) Act, which came into force last April and was designed to make it easier for start-ups to launch an IPO.
If you have a look at the biotech index chart below, you can see since the 1st of January that the biotech index has really taken off. The stock market has been strong this year, and that has indeed helped the biotech boom.
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