12:00 AM
Aug 15, 2011
 |  BioCentury  |  Finance

Rebalancing act

Biotech specialists look for value buys in wake of mid-August market meltdown

Companies in the midst of launching products or with weak balance sheets have been sold off or avoided by most investors during the market roller-coaster of the past two weeks. However, a handful of companies have been insulated from the carnage - their common threads being strong sales, pending or potential acquisitions, or positive data. Large caps as a group also held up relatively well.

In the last two weeks, the NASDAQ Biotechnology Index (NBI) fell 13%. The BioCentury 100 was off 12%, while the NYSE Arca Biotechnology Index (BTK) lost 17%. Over the same time, the S&P 500 and the NASDAQ were both off 9%, while the Dow Jones Industrial Average shed 7%(see "Seeing Red," A2).

A sliver of good news emerged on Thursday and Friday last week - the NBI, BC100 and BTK each gained 6% over the two days - as biotechnology buysiders started shopping for discounts on companies with strong fundamentals and balance sheets.

Lumps on launch

Almost every buysider contacted by BioCentury noted the punishment of companies with recent or upcoming launches.

The start of the market slide coincided with scaled down expectations for Dendreon Corp.'s Provenge prostate cancer vaccine following the company's 2Q call, which investors have taken as a bad indicator for biotech launches(see BioCentury, Aug. 8).

Indeed, Dendreon was the worst performer among biotechs valued above $5 billion. The stock shed $26.53 (72%) to $10.37 in the past two weeks.

"Obviously the product launch stories suffered the most post-Dendreon," summed up David Chan of Jennison Associates.

Even Vertex Pharmaceuticals Inc. was off $7.37 (14%) to $44.49 in the same period, despite a positive launch for HCV drug Incivek telaprevir.

Vertex reported $74.5 million in 2Q sales of Incivek, half from stocking and half from end user sales. The numbers beat analyst estimates for end user sales, which were $31-$35 million.

Upcoming and ongoing launch stories also had the poorest showings in the $1-$4.9 billion segment. Among the top decliners is Savient Pharmaceuticals Inc., which launched gout drug Krystexxa pegloticase in December. The stock was down $2.72 (39%) to $4.28 in the last two weeks after revenues missed consensus estimates.

Other big drops in the $1-$4.9 billion market cap band were InterMune Inc., which was off $10.44 (31%) to $22.94, and Human Genome...

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