The recent turmoil in global stock markets have hit many public companies in the biotech and other life sciences sectors particularly hard. Although many of these companies are in very good shape, their share prices took a beating this summer as markets generally reacted badly to concerns about credit crunches and talk about possible recessions. While some of these companies have recovered over the past few weeks, others remain in the doldrums.
One of the reasons why public biotech companies suffer more than other sectors when markets turn negative is that there a fewer specialists - investors and research analysts - which follow the industry and have a sophisticated understanding of biotech company fundamentals. As a result, when markets go south, there are few buyers for, and little liquidity in, shares of these companies. The flip side is that, for those investors who do understand the true potential of these under-valued companies, the recent turmoil provides for excellent buying opportunities.