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

By Brian Orelli, PhD – Mar 31, 2014 at 12:30PM

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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 1.57%) hepatitis C drug Sovaldi that could create an opportunity for AbbVie (ABBV 1.75%), 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 2.22%), 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.

Brian Orelli has no position in any stocks mentioned. Max Macaluso owns shares of Gilead Sciences. The Motley Fool recommends Gilead Sciences. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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