In tough market, biotech shines

Source: Fierce Biotech
By: Maureen Martino
08.01.2008

Wall Street has been in a tough spot these last few months, with the S&P 500 losing 9.5 percent over the course of June and July. But the biotech industry has emerged as a safe haven for investors in the face of poor performance in other sectors. "The biotech index is up 9.9 percent so far this year, compared with a decline of 13.7 percent for the S&P 500," notes the Boston Globe.

Investors see small biotech as a smart investment for a number of reasons. The much talked-about weak pipelines at Big Pharma companies are good news for small biotechs. Now more than ever pharma is looking to small developers to fill the gap. Take, for instance, Roche's massive $43.7 billion offer for Genentech, or BMS's smaller but still impressive $4.3 billion bid for ImClone. These deals bolster the sectors as a whole, as investors anticipate similar mergers and pacts with other biotech companies.

The potential for big deals isn't the only reason biotech makes for a good investment these days. Drugs--and the companies who make them--are somewhat insulated from economic pressures. While consumers may opt to hold off on purchasing a new car or computer during tough economic times, patients will buy drugs as long as they work. Investing in biotech comes with its own very real set of risks, but for now, at least, it appears to be preferable to other sectors.

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