Thursday, August 29, 2013

Concerns About a Biotech Bubble

It has been the summer of biotech. After years of fretting that investors had soured on the high-risk industry, untested biotechnology companies are all of a sudden going public. This year, 24 US firms have issued initial public offerings (IPOs), pumping US$1.8 billion into the industry. Their stocks rose an average of 20% on the first day of trading. Another eight companies plan to follow suit in the coming months.

If they do, it will be a record-setting year for biotechnology. Each new deal has amped up the excitement. But there is also anxiety that the field could be in a bubble. “It will be a cycle, and this cycle will eventually run its course,” says Noubar Afeyan, managing partner at venture-capital firm Flagship Ventures in Cambridge, Massachusetts. “These things end up appearing and disappearing for reasons that people can only explain in hindsight.”

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