Biotech stocks are susceptible to changes in interest rates, primarily due to the high costs associated with product development. In fact, recent studies show that the average cost of developing a new drug stands at a staggering $2.3 billion.

To manage these substantial costs, biotech companies often turn to loans as a crucial part of their financing strategy. However, the interest on these loans can eat into future free cash flows, making their stocks especially vulnerable to higher rates.

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Source Fool.com