Financial Times headline: Hedge funds scoop up biotech stocks after ‘catastrophic’ declines
Subheadline: Some managers expect cheaper valuations will fuel M&A activity
https://www.ft.com/content/bfd7d96f-2af9-4614-b1eb-78949365d…
Hedge funds are hunting for bargains in the beaten-down biotechnology sector, betting that a vicious sell-off has run its course and that lower valuations will breathe life back into deal flow.
A Nasdaq index of biotech stocks has tumbled almost a third from its all-time high last August, as hopes about the Covid-19 pandemic boosting the industry gave way to worries about frothy share prices. The sharp sell-off has, in turn, left many companies struggling to raise new funding.
However, some hedge fund managers now believe that prices have fallen too far relative to firms’ drug development prospects and their remaining cash levels. Those investors have started buying up stocks on the cheap, or launching portfolios to capitalise on the turmoil.