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Is This a Biotech Dip, Correction, or Time to Panic?

By Brian Orelli, PhD - Mar 31, 2014 at 6:30PM

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Biotech has fallen on potential pricing pressure for hepatitis C drugs from Gilead Sciences and AbbVie, but there may be more to the sell-off, providing a buying opportunity for some high flyers, such as Regeneron Pharmaceuticals.

Biotechs have dropped dramatically over the last week. The impetus seems to be worry about pricing for Gilead Sciences' ( GILD 0.09% ) hepatitis C drug Sovaldi that could create an opportunity for AbbVie ( ABBV 0.30% ), which is developing a hepatitis C regimen of its own.

While losing pricing power would be bad for the industry, there's likely more going on here. As Fool contributor Brian Orelli and health-care bureau chief Max Macaluso discuss in the video below, biotech valuations have been a bit inflated, so much of the decline could be due to investors itching to take profits.

The decline could be an opportunity to pick up share in a company such as Regeneron Pharmaceuticals ( REGN 2.98% ), which is up more than 550% over the last three years. It can be hard to pull the trigger when a company is flying high, but the downturn provides an opportunity to buy shares at a discount.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Regeneron Pharmaceuticals, Inc. Stock Quote
Regeneron Pharmaceuticals, Inc.
REGN
$654.04 (2.98%) $18.95
Gilead Sciences, Inc. Stock Quote
Gilead Sciences, Inc.
GILD
$69.71 (0.09%) $0.06
AbbVie Inc. Stock Quote
AbbVie Inc.
ABBV
$121.87 (0.30%) $0.36

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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