Yes, the biotech sector is way overheated but there are still a few nuggets worth investing in like GERN.
When speculating in biotech stocks it helps to have company with a drug that will cure a huge market. Cancer, diabetes, and heart disease are all huge markets where billions of dollars are spent on drugs trying to cure them. So when a new drug comes out for one of these diseases there is a lot of excitement about the future of drug for that stock. The future revenue streams in one year can exceed the stock current market cap which sends the price soaring. Plus, this kind of income can make the stock attractive to larger, big-pharma companies which look to acquire these tiny biotech companies at huge premiums.
This is the case with GERN which I bought last week. It has been moving slowly higher since then which is a good sign. Anytime you make a speculation and it immediately moves in a profitable direction, no matter how small, is usually a good sign that you have made the right choice at the right time.