Tweet of the Week: Big Biotech Dominates Industry Gains

Amgen, Biogen Idec, Celgene, Gilead Sciences, Regeneron Pharmaceuticals, and Alexion Pharmaceuticals make up 77% of the increase in the biotech sector over the past three years.

Brian Orelli
Brian Orelli and Max Macaluso
Apr 7, 2014 at 5:25PM
Health Care

This week's tweet comes from Bruce Booth (@LifeSciVC), who points out analysts at Bernstein concluded that just six companies contributed to 77% of the increase in value of the biotech sector over the past three years.

There's no doubt that Amgen, Biogen Idec (NASDAQ:BIIB), Celgene (NASDAQ:CELG), Gilead Sciences (NASDAQ:GILD), Regeneron Pharmaceuticals (NASDAQ:REGN), and Alexion Pharmaceuticals (NASDAQ:ALXN) have seen substantial gains over the past couple of years, but as Fool contributor Brian Orelli and health-care bureau chief Max Macaluso point out in the following video, the large sizes of the companies is what causes the large contribution.

A smaller biotech that goes from a market cap of $500 million to $1 billion doesn't add much to the overall valuation of the industry, but the company still provides a 100% gain for investors.

The stat is more relevant for generalist investors who invest in biotech ETFs. Since the funds are tied to indexes dominated by the larger companies, their increased valuation will drive returns for the shares of the ETF.