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12:00 AM
Jun 02, 2003
 |  BioCentury  |  Finance

Ebb & Flow

Optimists should be cheering the fact that investors continued to bid up biotech during the final week in front of the American Society of Clinical Oncology (ASCO) meeting, which opened in Chicago last Friday, even when they had plenty of profits to take. Indeed, judging from the big bounces some stocks were getting, investors may have decided there was too much downside in getting out early.

Skeptics, however, might say that more air is being put into an already filled tire. The naysayers attribute a lot of last week's buying to the "unsophisticated" crowd, which also should give reason for pause.

The BioCentury 100 gained 6.5% on the week, largely driven by speculation in the cancer group. Last week's move put the index up 39.2% in the 12 weeks since it bottomed on March 7. Given that the group already had jumped 31% in the prior 11 weeks, some market watchers were expecting a pre-ASCO selloff.

Investors did take some profits. Abgenix (ABGX) - which was slated to present only one abstract on Phase II data for its ABX-EGF antibody as a monotherapy in metastatic colorectal cancer - slipped $0.57 to $10.64 last week. The stock already had advanced 80% since March 7.

But on the whole, investors last week piled money into cancer companies, especially ones slated to present later stage data (see "Still Going . . . " below). There was chatter that the buying was coming from a spattering of momentum/aggressive growth buyers and retail investors, with a bit more emphasis on the latter group.

The momentum "has gone down to the retail level," said Mitchell Kaye of Xmark Funds, as it's hard for investors not to pay attention to some of the moves.

"There are doubles and triples and they're doing it on huge volume," he said. "We've seen almost exponential moves in some of the small cap names. Investors have been losing money for three years and they see biotech as an easy way to make money."

While there is "some degree of irrationality" in the trading, Kaye said, investors have noticed VCs getting involved in PIPEs - such as deals from cancer company Seattle Genetics (SGEN) and RNAi-play Sirna (RNAI) - a signal that valuations have become attractive.

It should be noted that biotech's move last week occurred in a fairly frothy environment for equities in general, thanks to positive consumer confidence data and stronger-than-expected home sales. The NASDAQ Composite jumped 5.7% to 1,595.91 last week and is approaching its 52-week high of 1,671.35. The Dow Jones Industrials gained 2.9% and the S&P 500 added 3.3%.

All eyes on Erbitux

A notable pre-ASCO mover was ImClone (IMCLE), which advanced ahead of keenly watched Phase III data for Erbitux cetuximab in metastatic colorectal cancer from European partner Merck KGaA (FSE:MRK). MRK was slated to present data at ASCO yesterday (Sunday).

Despite ASCO's best efforts to keep all data under wraps until it is presented at the meeting, investors poured into IMCLE on Friday, which just happened to be the day ASCO's abstract book was...

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