Paul Yook: Why I'm Optimistic About Biotechs

While many traders and investors may be shying away from biotechs after a lackluster end to 2015, Paul Yook is doing the exact opposite.

On Monday's PreMarket Prep Yook, the co-founder of LifeSci Index Partners and portfolio manager for the ETFs BBC and BBP, explained why he's optimistic on the sector.

"The truth is, I'm pretty optimistic about biotechs. Where are you going to get growth this year? I see a sector that has more cash on the balance sheet than it has ever had in history. I see a sector that has a lot of very exciting clinical trial readouts in 2016."

He added that, with biotechs outperforming the broader market nine out of the last 10 Januarys, "There are a lot of good reasons to be bullish on the sector." 

 Faith in Chimerex

Chimerex style="font-size: 13px; line-height: 20px;">CMRX, which experienced a drug trial failure in December and saw a 75% drop in price as a result, is one such stock Yook wouldn't mind buying. 

"In the case of Chimerex, what you have to do is look at the drug and say 'Is there any chance left and is the company going to continue to focus on it?'" he explained. "I think the CEO came out very strongly and said 'We are not throwing in the towel on this drug.' They're very well capitalized, they have cash to continue to analyze it, so  style="font-size: 13px; line-height: 20px;">what you get is potentially a drug that still works and you get to buy it 80% cheaper than it was the day before."

Chimerex opened Monday's trading at 8.76. 

However, be cautious  

Yook warned that anybody investing in biotech should be extra prudent because of the nature of blowups. 

<style="font-size: 13px;">"If you are an investor in biotech, you will experience blowups. It's just part of the game," he said. "And that's because roughly one in 30 drugs that enters clinical trials succeeds. So you see a lot of failures. So what you have to do is quickly analzye and asseses whether a stock is a buy or a sell."

Check out the rest of Paul's interview at 1:01:45 in the clip below.