I don't think it's fair to lump the biotech firms in with the tech stocks.
Biotech firms are different for a few reasons. Biotech firms have a very long lead time before getting FDA approval and can start making money. Therefore, it shouldn't be unusual that they are showing a loss each year. You can't create a MVP for a drug and starting selling it.
Second, the value of biotechs is firmly linked with IP. If the drug works, no one else can sell it until the patent runs out (usually 8-10 years after FDA approval). The valuations you see are not based on current revenue/profit, but rather potential revenue/profit once approval happens. Tech companies don't really have the benefit of IP that biotech companies have (someone can make an AirBnB knock-off and there is nothing AirBnB can do about it).
That said, I think the biotech stocks are getting really high valuations lately. There is a TON of risk in biotech stocks. If you're drug has bad side effects, you might not get approval and future revenue = $0. Not quite the same as tech stocks where you can still enter the market, you might not do as well as you thought, but you still get some revenue.
Part of the issue with biotech is that it costs so much to fail. Companies have to spend massive amounts of money just to find out an idea isn't going to work.
Biotech firms are different for a few reasons. Biotech firms have a very long lead time before getting FDA approval and can start making money. Therefore, it shouldn't be unusual that they are showing a loss each year. You can't create a MVP for a drug and starting selling it.
Second, the value of biotechs is firmly linked with IP. If the drug works, no one else can sell it until the patent runs out (usually 8-10 years after FDA approval). The valuations you see are not based on current revenue/profit, but rather potential revenue/profit once approval happens. Tech companies don't really have the benefit of IP that biotech companies have (someone can make an AirBnB knock-off and there is nothing AirBnB can do about it).
That said, I think the biotech stocks are getting really high valuations lately. There is a TON of risk in biotech stocks. If you're drug has bad side effects, you might not get approval and future revenue = $0. Not quite the same as tech stocks where you can still enter the market, you might not do as well as you thought, but you still get some revenue.