If a 30% year-to-date rally in the Biotech industry (BTK) has caught your eye but crimped your courage, it may be time to think again. That's because for all its short-term strength, the sexy corner of the otherwise stodgy Health Care sector (XLV) has really just regained lost ground, when in fact, a new cycle of innovation is just getting underway.
"I think we are beginning to see signs of life amongst biotechs, with new products coming to market that are gaining traction," says Marshall Gordon, health care analyst at Clear Bridge Advisors, a New York based asset manager with $55 billion in assets under management. "Innovation is a great way to get paid, in any market environment or regulatory environment."
Of course, the upside of biotech's innovation is paired with the downside of its legendary volatility, which is an inescapable side-effect for this business, as is the omnipresent opportunity (or threat) of being acquired, since Gordon agrees that every small biotech company is a potential target.
"If you look at the pharmaceutical industry today, they are desperate for products, and the way to get those is by buying biotech," he says.
To that extent, Gordon has flagged three small players that he thinks possess tremendous upside.Read More »from Big Pharma Is Desperate for Product and Small Biotech Is the Answer