Today Bloomberg is reporting that knives are out again for biotechnology stocks amid a rally that has burned skeptics repeatedly for six years.
Demand for options tied to declines in an exchange-traded fund tracking the companies rose to the highest level in three years relative to bullish ones, according to data compiled by Bloomberg. The Nasdaq Biotechnology Index has risen 549 percent since March 2009, including a 3.8 percent advance last week.
Interest in bearish options on drug developers has jumped in the last year after the group was called out as overvalued by Federal Reserve Chair Janet Yellen on two occasions. Biotechs are selling stock at a pace not seen in a decade and one concern is that something will disrupt the money spigot.
?The sector is dependent on capital that might shy away at the first sign of weakness,? Goldman Sachs derivatives strategists Katherine Fogertey and John Marshall wrote in a June 17 client note. ?Recent pipeline setbacks have increased concern of this going forward.?
Biotech companies are doing follow-on stock offerings at the fastest pace in more than 10 years. In the first quarter, biotech and pharmaceutical companies used 93 share sales to reap $18.7 billion, three times more than in 2014, according to data compiled by Bloomberg.
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