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The Biotech sector has been taking some huge hits the last few days mainly on fears of pricing pressure and increased competition. Should this be seen as this sectors fall from grace or a buying opportunity?
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Living in NJ (and knowing quite a few people in the pharma and biotech industry) I have always had a bullish bias towards biotech.
The advancements in technology is staggering when it comes to research and development and while the expense to bring a new drug to market is just as staggering the cash flow and overall business models of the larger companies is so powerful that, generally speaking, it is very hard to drag the giantess of these companies down.
In another thread on Monday I commented about GILD; one of the group of biotechs I regularly follow and have jumped into multiple times this past year.
The ESRX move to give ABBV the exclusive on their Hep C drug at a substantial discount was a game changer that will indeed spark competition.
The huge drop Monday in GILD was tempting, but I waited until yesterday to buy GILD <90; as well as the IBB <295. (I also feel CELG is cheap right now too, but had to make choices due to available funds.)
Despite the implications of potential pricing pressure (al la ESRX) I see the sector drop as an opportunity, however, due to the significant fluctuations i also tend to enter these positions by writing covered calls at various times. Biotech option premiums can be your friend when writing covered calls and I have done well with that stance.
Happy Holidays and looking forward to a healthy and profitable 2015;
-Adam
Old Hippy & Mortgage Pro -
GILD is not going to collapse any time soon just going through a phase right now and presenting us all with a buying opportunity!Comment
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I'd say it's a blip on the screen. I've bought biotech. Had it tank terribly . After I sell it recovers ...........and then some.
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