Overheard: A Chorus of Warnings on Valuations
After opting to hold rates lower last week, Janet Yellen didn’t express concern about froth in the stock market or in biotech valuations.
But the Nasdaq Biotechnology Index is up by more than 40% since she warned about it during Congressional testimony in July 2014. Pharmaceutical executives are less sanguine. For example, Roche Holding’s chief, explaining why it is unlikely to pursue deals for later-stage products, used the word “bubble” in an interview with Reuters last Tuesday. This followed similar warnings by Eli Lilly’s boss in July. True, pharmaceutical companies looking for products would love to see cheaper biotech valuations as they hunt for acquisitions. But Ms. Yellen had no ulterior motives when prices were even lower.
Even if prices have defied such biotech skepticism, the chorus of warnings is only getting louder.