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STOCKWATCH: Cycles and irrational valuations

This article was originally published in Scrip

Executive Summary

US publicly-quoted biotechnology appears as wildly expensive as it was in the bubble period of 2000. At that time, $2.5 billion was raised by biotech companies between July and August and the share prices of biotechs without any earnings were justified by optimistic earnings per share (EPS) multiples of 100 or more in the hope that these earnings would eventually appear. For reference, the valuation of revenue-generating established pharma companies at that time was based on EPS multiples around 15 (in 2012, 10 is more typical)

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