Neil Woodford has weighed into the debate over whether biotech is in a bubble or sustainable bull market. The veteran fund manager drew a distinction between what he sees as the bubbly multiples of some publicly traded U.S. stocks and the bargain-basement valuations of unquoted British biotechs.
Talking to The Telegraph 10 days before the closing date to invest in his medical-heavy Woodford Patient Capital Trust, the fund manager sought to differentiate between the hype of Nasdaq and the comparatively sleepy backwaters of British biotech. While a clutch of high-profile European biotechs such as Cellectis ($CLLS) and Forward Pharma ($FWP) have joined the party on Wall Street, many early-stage players are still toiling away and scrambling for cash in the United Kingdom and neighboring countries. These are the companies in which Woodford wants to invest.
"I think there is a bubble in some parts of the quoted biotech sector, certainly in the U.S. There are some pretty punchy valuations that I certainly wouldn't feel comfortable with," Woodford said. "But that doesn't describe all biotech valuations everywhere. In the unquoted space and in early-stage biotech companies in the U.K. there is no cross-contamination from Nasdaq valuations at all. These valuations of U.K. biotech businesses … frankly are on the floor." Woodford views these private British biotechs as "completely disconnected" from the rise and fall of stocks trading on Nasdaq.
If Woodford is right, investing in such companies will expose his new fund to the biotech boom while insulating it from the much-feared and discussed possibility of a bust. The flip side of such optimism is that if a crash slows the conveyor belt ferrying biotechs to big-ticket partnerships, buyouts and IPOs, early-stage British biotechs may find it harder to find capital when they need to graduate to large clinical trials.
- read The Telegraph article