Health and Science

Biotech is moving beyond the 'disaster' of the past 2 years, says Michael Yee

Key Points
  • Biotechnology is on the rise, says Jefferies managing director.
  • Vertex Pharmaceuticals stock rose more than 20 percent on Wednesday.
  • Yee said the politics and damaging headlines of the last two years hampered the sector.
Jefferies' Michael Yee: Still a valuation call in biotech

As Nasdaq's biotechnology exchange-traded fund (IBB) percolates higher on the year, some analysts see a struggling sector finally dragging itself out of the weeds.

"Obviously, the last two years were in some ways a disaster for biotech," said Michael Yee, managing director at Jefferies, on CNBC's "Power Lunch" Wednesday. "The group was very painful, based on drug-pricing headlines, political rhetoric — that was painful."

The IBB fund rose over 1 percent on Wednesday, thanks in no small part to the growth of Boston-based biotech company Vertex Pharmaceuticals. On Tuesday, Vertex announced that a new drug cocktail improved lung function in patients with cystic fibrosis by 9.6 percentage points or more. Vertex shot up more than 21 percent on Wednesday.

"Vertex zoomed to become the fastest large-cap growth company out there in the sector," Yee said. "Even up 20 percent, we would buy this stock."

The biotech industry has weathered a number of damning headlines over the past two years — perhaps most notably those surrounding Theranos, a blood-testing company that was the subject of a damaging Wall Street Journal investigation in 2015.

Yee said the politics clouding the sector have begun to dissipate in 2017, making biotech a more attractive buy.

"Good companies in a bad neighborhood getting better — we'd stick to that," Yee said.

The IBB fund has grown more than 20 percent year to year.

iShares Nasdaq Biotechnology ETF, 2012-2017 (Source: FactSet)