12:00 AM
 | 
Sep 03, 2002
 |  BioCentury  |  Finance

Ebb & Flow

Although the recent biotech rally has lost some steam over the past two weeks, the BioCentury 100 has performed remarkably well over the last seven weeks of the summer. The other equity indexes also have traded up over that period, making it difficult to gauge whether biotech is being loved for itself, but the industry has always done better when it's moving in tune with the rest of the markets.

The BioCentury 100 index slipped 6.3% last week, which turned out to be a soft week for equities, but it remains up 7% over last seven weeks, bested only by the 8% gain by the AMEX Pharma Index.

Despite the updraft, biotech was down 22% over the summer, and some market watchers opine that the July bounce was more technical than anything else (see "Bye-bye Summer").

"I think what we've seen is a bounce off the bottom," said Robert LeBoyer, who recently joined InvestBio as the firm's first biotech analyst. He'd like to see more product successes before he calls this a sustainable rally. "Generally, product success has driven the sector," he said said. "And when people make money on product stories, it tends to have a spillover effect."

In fact, last week turned out to be pretty good for biotech fundamentals. The week included five approvals, capped on Friday by a reversal of fortunes for Genelabs (GNLB), which received an FDA approvable letter for Prestara prasterone, the company's treatment for systemic lupus erythematosus (SLE) (see Product Development, A13).

Amgen (AMGN) got two European approvals: Neulasta for neutropenia in patients on chemotherapy and Aranesp for chemotherapy-induced anemia. Other companies getting approvals in the U.S. and elsewhere included QLT (TSE:QLT; QLTI) and Pharmanetics (PHAR).

The AMGN news was particularly helpful, according to LeBoyer. "When they do well, everybody gets more optimistic, and more money gets attracted to the sector," he noted.

Continental European buysiders continue to root for the U.S. (see BioCentury, Aug. 23) "In Europe and the U.K., sentiment follows the U.S.," said buysider June Scott, director of Sagitta Asset Management.

She noted that companies with less cash, which characterizes the European biotech sector, are riskier in bear markets than companies with more cushion, making the U.S. a more attractive market right now. In Europe, there are no companies like Millennium (MLMN), which had $1.9 billion in cash at June 30. By contrast, two of the best-funded companies in Europe are Cambridge Antibody (LSE:CAT; CATG) and Oxford GlycoSciences (LSE:OGS; OGSI). CAT had £138 million ($210 million) in cash at June 30, and OGS had £176.6 million ($260.8 million) at Dec. 31, its last reporting period.

Actimmune's next act

InterMune (ITMN) was up $4.73 (23%) to $24.87 on the week, including a $4.66 (26%) jump to $22.66 on 18.2 million shares on Wednesday's news that its Actimmune significantly decreased mortality in a subset of patients with mild to moderate idiopathic pulmonary fibrosis (IPF) in a Phase III trial. Even though the trial missed its primary endpoint of relative reduction in disease...

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