Biotech stocks rebound after month-long rout
By William Borden
NEW YORK (Reuters) - Biotechnology shares recaptured some of their luster on Tuesday as investors started bargain hunting after the sector's slump over the past month, which accelerated during last week's stock market plunge.
``They were down way too much before,' Matthew Geller, analyst at CIBC World Markets said. ``The fundamentals of the group have improved over the past few months. There are some great buying opportunities.'
The Nasdaq Biotech Index surged 8.96 percent, or 76.03 points, to 925.05. The broader Nasdaq Composite Index rose 6.38 percent, while the S&P 500 rose 2.37 percent.
Biotech stocks fell 48 percent from the all-time high set March 7 at 1,619.98 to Monday's close. The index showed a 24.5 percent drop over the six trading days between the close on April 7 and Monday.
Momentum that drove biotech stocks higher prior to March was equally strong when they fell over the past month, with ``panic selling' and margin calls -- a requirement for investors who borrowed money to sell holdings or put more cash into their accounts -- helping drive the segment lower, analysts said.
Some investors were not eager to buy biotech shares when they were falling from the highs reached last month -- when genetic research and biotechnology were the flavor of the week in the fickle investment community.
Doug Christopher, analyst at brokerage Crowell Weedon, said the market overreacted during the selloff.
``In a panic all the companies are brushed with the same stroke,' Christopher said, noting that many of the established firms, such as Amgen Inc. and Genentech Inc., were punished along with more speculative stocks.
Christopher said the companies that have a broad portfolio of products and alliances with larger pharmaceutical companies will be able to withstand the market shocks.
Among the biotech leaders Tuesday, Amgen shares rose 5 points to 58-3/8. Genentech rose 5-5/8 to 132-3/8.
Cubist Pharmaceuticals Inc., a maker of antibiotics, rose 13-1/4 to 30-1/2.
Among the stocks that fell sharply, Enzon Inc. fell 7 to 26 after U.S. Bancorp Piper Jaffray downgraded the stock to a neutral from a buy. The company released results from a Phase III trial for a hepatitis C treatment that the U.S. Bancorp analyst said were below expectations.
CuraGen Corp., a genetic research firm, fell 4-15/16 to 29. |
