Who Says There’s No Biotech Bubble?

Biotech stocks are plunging today, which once again raises the question: Are we witnessing the popping of the biotech bubble?

It’s hard not to think it might be. Today, Gilead Sciences (GILD), Intercept Pharmaceuticals (ICPT), Celgene (CELG), Amgen (AMGN) and Vertex Pharmaceuticals (VRTX).

Credit Suisse analyst Ravi Mehrotra still doesn’t think biotechs are in a bubble:

In our view, we are/were in a biotech bull-run vs. biotech bubble. We remain bullish for the 2014 year-end biotech sector performance: (1) we do expect continued sector-wide volatility; (2) there are elements of the biotech sector which are analogous between ’99/’00 (biotech bubble) and ’13/’14 (biotech bull) markets – most notably, a relative plethora of platform/early-stage companies – however, we highlight that the business models for platform technology companies in ’99/’00 and ’13/’14 are markedly different – now, new gen platform technology companies are actually trying to bring products to market (vs. just selling tools and services). (3) For the large-caps, unless we see fundamental disappointment(s) from the "leadership" companies, we think their valuations actually provide room for upside (Large-cap biotech is now trading at a 2016 PE discount, but 4 times the EPS growth, to/of the S&P500). Our two keys picks in large-cap land remain [Biogen (BIIB) and Gilead Sciences].

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ISI Group’s Joe Ruggieri looks for signs of a bottom:

I do think we have a few potential fundamental catalysts over the next few weeks/months (AACR this weekend ([Pfizer (PFE)] Palbo data), EASL next week ([Merck (MRK)/Gilead (GILD)/Bristol-Myers Squibb (BMY)/Intercept Pharmaceuticals (ICPT)]), MNKD PDUFA 4/15, earnings, [Celgene (CELG)] Markman hearing 4/29, [Amgen (AMGN)] Kyprolis phase data 2Q, [Vertex Pharmaceuticals (VRTX)] phase 3 CF data mid-yr, ASCO, etc) that could provide an inflection point.  While this continues to be painful, correlations remain high and hedge fund de-risking/capitulation not helping, think we could start to see buyers dip toe into high conviction ideas soon.

How soon is now?