Credit Suisse on Biotech’s Nirvana Phase

There’s a really interesting piece of research out from Credit Suisse in which Ravi Mehrotra & Co lay out an “It’s different this time” thesis that seeks to explain why the huge rally in biotech stocks is justified and possibly not over yet.

They note that there are indeed bubble-like optics at play here (The cumulative market cap of the 5 largest cap biotech stocks is $513B currently up from $128B at the beginning of 2011, the BTK index is up 204% since 1/1/2011 versus 64% for the S&P500, etc). But the CS argument is that business models have radically shifted, and now biotech companies can self-fund and give away much less of their profits to the big pharmas they used to be desperate to partner with. Therefore, investors may be appropriately bidding up the biggest and best companies in a re-rating of sorts.

Here’s an illustration of what this looks like now, and could develop into in a new “Holy Grail” phase…

Our Hypothesis – Large Cap Biotech Is So Successful Due to Unique “2.0” Business Model, Evolution to “3.0” Model Key For Continued Success

Screen Shot 2015-03-27 at 8.35.34 AM

 

Source:

Are We In A Biotech Bubble? Domain Domination Is The Answer!
Credit Suisse Equity Research – March 27th 2015

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. Skrotning av bil Kungälv commented on Nov 20

    … [Trackback]

    […] Read More here to that Topic: thereformedbroker.com/2015/03/27/credit-suisse-on-biotechs-nirvana-phase/ […]

  2. scotiabank sign in commented on Nov 24

    … [Trackback]

    […] There you will find 89386 more Information to that Topic: thereformedbroker.com/2015/03/27/credit-suisse-on-biotechs-nirvana-phase/ […]

  3. Matthew Erausquin commented on Nov 26

    … [Trackback]

    […] Find More to that Topic: thereformedbroker.com/2015/03/27/credit-suisse-on-biotechs-nirvana-phase/ […]

  4. Regression testing commented on Dec 20

    … [Trackback]

    […] Find More here on that Topic: thereformedbroker.com/2015/03/27/credit-suisse-on-biotechs-nirvana-phase/ […]

  5. easyweb td commented on Dec 24

    … [Trackback]

    […] Find More Info here to that Topic: thereformedbroker.com/2015/03/27/credit-suisse-on-biotechs-nirvana-phase/ […]

  6. Software Testing services company commented on Jan 11

    … [Trackback]

    […] Read More Information here to that Topic: thereformedbroker.com/2015/03/27/credit-suisse-on-biotechs-nirvana-phase/ […]

  7. rolex replica commented on Jan 14

    … [Trackback]

    […] Find More on on that Topic: thereformedbroker.com/2015/03/27/credit-suisse-on-biotechs-nirvana-phase/ […]

  8. digital transformation services commented on Jan 16

    … [Trackback]

    […] Find More to that Topic: thereformedbroker.com/2015/03/27/credit-suisse-on-biotechs-nirvana-phase/ […]

  9. breitling replica watches commented on Jan 22

    … [Trackback]

    […] Read More here to that Topic: thereformedbroker.com/2015/03/27/credit-suisse-on-biotechs-nirvana-phase/ […]