The biotechnology sector is on a tear in the stock market, with the Nasdaq Biotechnology Index, soaring 61 percent in the last year.
But some experts see signs of a classic bubble.
"My gut reaction is that biotech valuations are always too high," Amit Roy, a pharmaceuticals analyst at Foveal research group, tells the
Financial Times.
"We need to think about which patients are going to get given the drug. The same mistake is always made: the drug is amazing, but it is not amazing enough."
Some analysts overestimate sales, assuming a new drug will be taken by all the patients who would benefit from it, Roy says.
Valuation models have to be stretched to justify current stock prices. "When I look at valuations, the old way I used no longer works," Evercore ISI analyst Mark Schoenebaum tells the Times.
"Almost all the stocks I cover trade above, in many cases double-digit percentage points, their base case discounted cash flow."
Meanwhile, many experts see frothiness in the tech sector overall. Billionaire entrepreneur Mark Cuban says it's in a bubble worse than that of 2000. The difference now is that the bubble is concentrated among privately held startups,
Cuban writes on his blog.
"Back then the companies the general public was investing in were public companies. They may have been horrible companies, but being public meant that investors had liquidity to sell their stocks," Cuban says.
Obviously that liquidity doesn't exist in private markets. "The bubble today comes from private investors who are investing in apps and small tech companies," he notes.
Not surprisingly for a co-founder of once-dominant Internet portal AOL, Steve Case disagrees with Cuban.
"There's a lot of capital, maybe a little froth in places like San Francisco or New York City or Boston, the tech hubs,"
Case tells CNBC.
"But most of the country is desperately in need of capital. Most entrepreneurs need those angel [investors] in their communities to support them, and I'm hopeful that there will be more people who are supportive of these young startups."