NEW YORK, June 5 - Genomics stocks jumped Tuesday, tagging along as investors drove up the Nasdaq by 3.6 percent and the Amex Biotechnology Index to a six-month high.
"Because Nasdaq is looking a little better, investors are looking [to be] a little more adventurous," said James Reddoch, an analyst at Banc of America Securities.
Some genomics companies won't be profitable for another four years, he added, but risk-tolerant investors are beginning to appreciate that a few companies "have a huge amount of value that is hard to quantitate."
Shares of genomics technologies companies rose broadly across the sector with Affymetrix, Celera, and Incyte among the day's biggest gainers. Affymetrix jumped $5.40, or 12 percent, to close at $50.42. Celera gained $3.25, or 7.2 percent, to close at $48.27, and Incyte jumped $1.83, or 7.9 percent, to end the trading session at $24.94.
On Tuesday, Scott Greenstone of Thomas Weisel Partners, raised his recommendation for Affymetrix to a strong buy from a buy, based on his expectation for high profit growth.
Overall, the Amex Biotechnology Index reached its highest level in six months, closing up 5.1 percent higher at 674.38.
Analysts said that Human Genome Sciences is acting as the bellwether for the genomics sector, helping to bring up other stocks, while recent acquisitions may also be playing a role in the renewed interest in biotech and genomics stocks.
Reddoch cited Human Genome Sciences as one company "that is executing on its business plan." Analysts said that enthusiasm for Human Genome Sciences was having a trickle down effect due to the belief that companies are more willing to invest in new equipment when their stock price is doing well.
"It's the absolute inverse of what happened earlier in the year," said Mike King, an analyst at Robertson Stephens.
King added, however, that the investors' new-found exuberance may be due in part to their having fewer investment options, with internet and technology stocks currently out of favor.
"Certainly there's a smaller [pool] of stocks to invest in," he said. "So yeah, you could be getting more risk-tolerant investors for that reason."