7%The S&P Biotech is now down about 12% this year alone with only about nine months complete. It's down ~59% of from its high of less than three years ago during the most brutal biotech bear market in history. As I've said, this is a time for survival in biotech and to prove resilience. The windfall gains will typically have to wait until interest rates start sustainably falling once again. boazklinghorn's darling ABCL is now down about 52% since the beginning of the year. ABCL is down a staggering ~92% in less than three years. Assets that don't make money and burn lots of cash with payouts long in the future are being hit hard. If the risk-free FED rate climbs to 7%, as JP Morgan's CEO believes may be in store, imagine what internal rate of return is needed for a microcap biotech given it isn't a risk-free asset. Its a very tough hurdle for many biotech companies to jump. High interest rates are a different world for biotech and many biotech companies are going into bankruptcy or reorganization as they struggle. CZO is positioned to pick over the rubble of a biotech landscape in crisis and see if it can combine assets to build a viable company that needs growing levels of cash to become a biopharma in the future. When interest rates start to fall again then it will be a new bull market. If the world is potentially headed to a risk-free FED rate of 7%, that it is currently unprepared for, there could be more sharp loses in biotech ahead. A 7% FED rate is a stunning 31% higher than the current FED rate of 5.33%. The Canadian economy could be crushed which could significantly help an exporter to the US like CZO as long as the US consumer holds up in CZO's product category. Let's hope CZO's plans include fortress cash balances, material near-term revenue generation, flexability to adjust in a continued biotech cash crunch, and that PGX progresses cleanly in this scale-up with a short time to potential pay-off. With high interest rates it needs to be a very compelling project to justify the risk. This is a market for caution until the dust settles. Some believe the world is headed to a nasty credit event as a decade of ~0% interest rates meets the sudden and unexpected shock of a 5-7% risk-free FED funds rate and the global economy copes with its debt.
