12:00 AM
 | 
May 06, 2002
 |  BioCentury  |  Finance

Ebb & Flow

Biotech advocates can be excused for their increasing frustration. Even as the industry's leaders continue to post profits, the BioCentury 100 lost another 2% last week and fell beneath the 1300 barrier (1295) for the first time since Oct. 15, 1999.

Last week's sell off puts the BC100 down 17% so far in the second quarter, and down an uncool 32% on the year. The BioCentury London Index also is down 32%, making the normally volatile NASDAQ look like a safe haven. The NASDAQ Composite is down 17% so far this year, thanks largely to a 13% drop so far this quarter.

The performance of the indexes may have some investors questioning the traditional defensive posture of healthcare stocks. Big Pharma is down 8% this year, and is getting outpaced by both the S&P 500 and the Dow Jones Industrials (see "Leading the Decline").

Badmouthing

The rumor mill certainly hasn't been tilted in the industry's favor. Already skittish investors were dealt with another spate of rumors that core investors are exiting the sector. The week prior, Janus poured water on stories that it was abandoning the healthcare space. So last week the rumor mill focused on Stu Weisbrod's Merlin BioMed Asset Management.

Not the case, according to Weisbrod. "We've been hearing that we're liquidating all positions and going out of business," he said, when actually "we've been selling the smaller caps and reinvesting in the bigger caps."

Weisbrod has been adding to positions in Genentech (DNA), MedImmune (MEDI) and Idec (IDPH). He also has a big stake in NPS (NPSP), based on the fact that it has "three products in pivotal trials and an $800 million market cap."

NPSP's Phase III compounds include its Preos (ALX1-11) injectable recombinant human parathyroid hormone to treat post-menopausal osteoporosis, and AMG 073 calcimimetic compound to treat hyperparathyroidism.

Weisbrod argued that the market has stopped valuing the sector's pipeline. "People aren't valuing pipelines, but when they do, they'll snap back," he said. Weisbrod believes the industry needs a big product approval - "like a FluMist" - for that to occur. MEDI's FluMist influenza vaccine is under review at the FDA.

Earlier in the week, Weisbrod also put Cialis tadalafil into the bellwether category, but the erectile dysfunction (ED) treatment from Icos (ICOS) and partner Eli Lilly (LLY) ran into questions at the FDA, so the product's timeline is being pushed back(see below).

Whiffing

Indeed, would-be competitors in the ED space still can't make it to first base, with ICOS taking a beating on the news that the FDA wants additional trials and other data for Cialis. The agency did issue an approvable letter for the PDE-5 inhibitor to the Lilly Icos joint venture, but the request pushes back the expected product launch at least six months, to sometime in 2003(see B6).

ICOS dropped $13.24 (34%) to $25.76 on 17.2 million shares on Tuesday's news, and closed Friday at $25.08, down $14.22 on the week.

The setback may have buoyed Bayer (FSE:BAYG; BAY), which managed to eke out a $0.10 gain to $33 in Big Board trading despite posting disappointing first quarter results. BAYG, which could launch its Nuviva vardenafil PDE-5 inhibitor in September, reported that pharma sales declined to E1.3 billion ($1.1 billion) in the first quarter from E1.6 billion ($1.4 billion) in the fourth quarter of 2001.

Nuviva, which is awaiting approval in the U.S., Europe, Japan and Mexico, appears to have a different profile than either Cialis or Viagra, the PDE-5 inhibitor from Pfizer(PFE) (see BioCentury,...

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