In 2022, the biotech industry was hit hard by rising interest rates. Small biotech firms require large sums of money for clinical trials and ambitious R&D budgets. And when consumers, investors, and central banks begin to cut back on spending, easy money becomes scarce. The Federal Reserve’s rate hike spree in 2022 did not bode well for biotech companies. Experts recommend that healthcare investors put the majority of their money into large-cap pharmaceutical stocks. However, as global inflation begins to fall, some analysts believe that 2023 will be a good year for biotech companies. There are already signs that the biotech sector is reviving. The SPDR S&P Biotech ETF is up 10% year to date as of February 8.
Bloomberg in a January 2023 report said that biotech executives are facing a lot of scrutiny on cash from investors amid a tough environment. Investors are inquiring about biotech companies’ cash reserves and how long they are expected to last. The report also discussed the industry’s most recent mega event, the JPMorgan Healthcare Conference in San Francisco, where biotech executives typically gather to discuss promising pipelines and ambitious projects. However, companies spent the majority of their time this year assuring investors that they have enough cash.
Biotech companies were accustomed to quick cash, particularly during the pandemic era, when governments and venture capital firms poured money into small biotech companies with promising pipelines. Bloomberg cited SVB data indicating that VC
This difficult situation is also compelling several biotech firms to postpone clinical trials and even IPOs. However, biotech bulls believe the market will recover sooner or later. A number of biotech stocks are currently undervalued. These companies are developing long-term treatments that could serve as catalysts for their stock prices. As a result, we decided to look at some biotech stocks with attractive valuations and strong hedge fund sentiment in this article. For this article, we combed Insider Monkey’s database of 920 hedge funds for the most popular biotech stocks with a PE ratio of less than 15. This means these are the most undervalued biotech stocks to buy now according to hedge funds.