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Wednesday March 19 1:05 PM EST
Biotech stocks seen victims of their own success
NEW YORK, March 19 (Reuter) - Biotech stocks, which have foundered since the end of
February, may be victims of their own success, as investors value the stocks based on actual sales,
rather than speculation on products in the pipeline.
Analysts said that before biotechnology companies have products on the market, their stocks tend
to be valued to extremes.
Now, with several biotech companies having brought drugs to the market, their stocks are being
valued more on sales than the promise of products in development.
"Once they become profitable, valuation may be based more on early sales, rather than what is in
the pipeline," said Mary Ann Gray, an analyst with Dillon Read.
"The sector itself is fundamentally making great strides with products that are moving through the
trial processes and getting to market," she said.
The American Stock Exchange Biotechnology Index has been stumbling since reaching a high of
169.9 on February 25 of this year. The index traded at 144.36 midday Wednesday, 4.35 points
below Tuesday's close.
"The stocks had been going gangbusters up until the end of February," said Franklin Berger, an
analyst with Josephthal, Lyon & Ross. "The index was up a blistering 18.8 percent for the running
12 months ending in February."
"I think there is a lot of rotation...biotechnology is one of the more volatile sectors," he said.
Berger also attributes high valuations to speculation before products come on the market.
"No matter how good the drug is, it's always possible to get overvaluation," Berger said.
Agouron Pharmaceuticals Inc , which got clearance from the U.S. Food and Drug Administration to
market Viracept for HIV last week, was down three points at midday to 71.
Agouron stock's 52-week high was 101; its 52-week low was 29.
Biogen Inc traded at 39-1/4 Wednesday, down from Tuesday's close of 40 and its 52-week high of
52-3/4. Biogen introduced its multiple sclerosis drug, Avonex, last year.
Vivus Inc , which got clearance for its MUSE suppository for impotence late last year, traded at
39-3/4, down 2-1/2. Its 52-week high was 81-1/4. |
