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Biotech Companies Look to Combat Terrorism
By Nadine Wong
Special to TheStreet.com
09/26/2001 10:44 AM EDT
When I research biotechnology stocks, I often encounter the topic of biological warfare, or bioterrorism. Given the recent attacks and the real possibility of a sustained campaign against terrorism, there may be heightened interest in this area.
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However, don't expect bioterrorism to become the next hot market to invest in. Put simply, it's a lot more complicated than it seems on the surface. If you think biotech companies have immediate solutions for or secret weapons against a sudden outbreak of smallpox, anthrax, Ebola, typhus or any other horrible infectious disease, you're wrong. Some of these diseases are not understood enough yet to render them harmless, although companies are indeed developing vaccines and new medications to treat them.
More likely, you'll find companies examining advanced diagnostic methods -- ranging from genetic analyses to breath analysis -- to determine whether symptoms are just the flu or something more deadly. Early diagnosis is key to providing effective therapy and determining whether the illness originated from biological warfare. So far, that's the best defense we have.
As I reviewed my notes and literature, I found a few companies that are developing tools that can help fight germ warfare.
California-based Cepheid (CPHD:Nasdaq - news - commentary - research) has created a battery-operated instrument that uses sensitive DNA-detection methods, referred to as polymerase chain reaction (PCR), to identify bioterrorism agents. It has also developed a device to prepare a biological sample for analysis, which can be used to help identify organisms. As a whole, the company develops new technology platforms to create miniaturized instrument systems for research and testing. Though sales for Cepheid's devices have historically been slow, that's expected to change.
With more terrorism-related concerns, most recently about crop dusting, it's no wonder Cepheid shares saw an impressive one-day jump of about 89% when the market reopened last Monday. Shares closed Sept. 10 at $1.53 and ended the day Sept. 17 at $2.90. They've settled back a bit to close at $2.32 this Tuesday.
Also in the news is Massachusetts-based Bruker Daltonics (BDAL:Nasdaq - news - commentary - research), which announced last week that it won a $10 million Defense Department contract for its devices used to detect biological-warfare agents. These devices measure the weight of air molecules, and once an agent is detected, Bruker software classifies it.
Bruker Daltonics' top-line growth has been driven by strong demand for its life-sciences and drug-discovery instruments, which account for 70% of its revenue. About 5% of current revenue is derived from defense-related products. The company is boosting its growth and generating additional earnings by introducing new products rapidly, including five new life-sciences products that entered in the market this year.
Though Bruker Daltonics shares remained relatively stable when markets reopened Sept. 17, they did see a 13% spike on this Monday's rally. Shares closed higher again Tuesday at $14.80.
It was great to see the market break its downward trend Monday, but is it a real rally or just a short-term bounce? Not to sound negative, but I think the market will swing back and forth while preparing for the worst-case scenario: a recession and a protracted war on terrorism.
These two biotech companies have seen some nice gains lately, and because of the market conditions, some profit-taking could lie ahead. But at the same time, these are nice bets for investors who seek opportunity in stressful times.
Fortunately, the U.S. has not experienced a bioterrorist attack. Let's pray that we don't.
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Nadine Wong is the editor, publisher and co-founder of the BioTech Sage Report and a biotech columnist for worldlyinvestor.com. At the time of publication, Wong had no position in any of the securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While she cannot provide investment advice or recommendations, Wong invites you to send comments on her column to Nadine Wong.
TheStreet.com and Wong are parties to a joint marketing agreement relating to the BioTech Sage Report, a monthly biotech newsletter written and owned by Wong. Under the agreement, TheStreet.com provides marketing services, including promotion of the BioTech Sage Report on TheStreet.com's Web properties and in her columns that appear on RealMoney.com. In exchange for these services, Wong shares with TheStreet.com a portion of the revenue generated by subscriptions to the BioTech Sage Report resulting from those marketing efforts.
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