The S&P 500 Biotechnology stock price index (Alexion Pharmaceuticals Inc (NASDAQ:ALXN), Amgen Inc (NASDAQ:AMGN), Biogen Idec Inc (NASDAQ:BIIB), Celgene Corporation (NASDAQ:CELG), Gilead Sciences Inc (NASDAQ:GILD), Regeneron Pharmaceuticals Inc (NASDAQ:REGN), Vertex Pharmaceuticals Inc (NASDAQ:VRTX)) peaked at a record high on February 24. It is down 10.5% since then through yesterday’s close. It is still up 208% from its 2011 trough, when the forward P/E fell to 10. This valuation multiple is now 22.0.
Driving valuations higher in the industry since mid-2011 has been an amazing increase in industry analysts' expectations for short-term and long-term earnings growth. The former has tripled to over 30%, while the latter has doubled to almost 25%. The recent correction in Biotechs was triggered by concerns that the government will pressure the industry to reduce the prices of some of its higher-priced products.
Today's Morning Briefing: Internal Correction. (1) S&P 500 remains at record high despite everything. (2) FSMI rebounding. (3) Priciest industries a bit less so. (4) A good excuse for taking some profits out of Biotech. (5) Internet Retailing is full of hot air. (6) Internet Software is cheaper, but not cheap. (7) Is there a shortage of growth stocks? (8) Growth stocks tend to attract attention and well-financed competitive startups. (9) Internal corrections broaden the bull market. (10) Financials may be too cheap now that they are so regulated. (11) The parable of Alibaba and Tencent.
