There is no bubble. Not all boats are rising. It's true that the sector, on average, had a remarkable growth year in 2013, but that's because a select group of biotechs had super-success, even while others floundered, and their numbers inflated the mean.
So if it's not a biotech bubble bursting, what's going on in the sector? Why have stocks been moving downward over the past couple weeks?
Here's the Real Deal with Biotech Stocks
What's happening is investors have gotten nervous. They're not sure of the high valuations they have assigned to these young companies. They're questioning their own judgment. And in a moment of somewhat panicky behavior, they're selling their uncertainty.
But in doing that, they arbitrarily push valuations lower, which makes it more difficult for the biotechs to raise new money as needed. Notice that it's almost always after a rapid rise in stock price that a biotech will open up a public offering of stock. Why? The increased value of the shares will help offset the dilutive effects of the offering, so the shares will be easier to sell. Very often, the price dilution disappears within a few days.
Eventually, the market will wake up and come to realize that high valuation is healthy for the bioscience sector, that it sustains research and brings exciting new medicines to patients who need them. And the current trend will reverse direction powerfully.