Nadine Wong has been mentioned here - she writes "Biotech Sage" columns for TSCM. She covers IMCL, BGEN, and DNA in the current one. I've included links to her previous columns, which are all available on the free site.
She's certainly more balanced than some of the other denizens of TSCM. Her pharma roots show in the companies she covers - mostly big.
Doc
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Gilead is Worth the Wait
thestreet.com
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If Only Human Genome Sciences Could Be Cloned
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Bad News Sends Biotech Sliding
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[Current Column - text only, graphs omitted]
Commentary: Biotech Sage
Watching the Stories Unfold in Biotech Shares
By Nadine Wong
Special to TheStreet.com
6/27/01 1:05 PM ET
thestreet.com
Volatility is the name of the game when it comes to playing the biotech sector. For example, you've probably noticed much recent fluctuation in shares of companies like ImClone (IMCL:Nasdaq - news - commentary), Biogen (BGEN:Nasdaq - news - commentary) and Genentech (DNA:NYSE - news - commentary), and there's no end in sight just yet.
All three companies have drugs in the late stages of development that need approval from the Food and Drug Administration. Their stories won't be finished until the FDA gives its thumbs up -- or thumbs down. But with the market in such flux, investors can find both short-term and long-term opportunities.
Potential Winner for ImClone
For a month or so after their early-April dip, ImClone shares have enjoyed a pretty good run. But since the beginning of June, they've slowly petered out. ImClone closed Tuesday at $47.24, off from its 52-week high of $69.13. Undoubtedly, there has been some profit-taking, despite continued value in ImClone's drug-development program, especially for cancer drug IMC-C225.
ImClone Loses Steam
Shares have trended down after some profit-taking.
J.P. Morgan recently initiated coverage on ImClone, rating it a long-term buy with a 12-month target of $66. In its research alert, J.P. Morgan noted, "ImClone's lead product candidate, IMC-C225, is a first-in-class, potential blockbuster drug for the treatment of colorectal cancer, head and neck cancer and potentially other tumors. Sales could exceed $500 million in 2006, and IMC-C225 could transform ImClone into a fully integrated biopharmaceutical company, the most profitable and sustainable business model." J.P. Morgan has no underwriting relationship with ImClone.
Among analysts, ImClone's 12-month price target ranges from as high as $90 to a low of $66. The consensus estimate for this year is a loss of $1.38 a share. Next year, the company is expected to trim that loss to 44 cents a share.
Eventually the IMC-C225 story will unfold, as the FDA has put it on a fast track for the treatment of colorectal cancer. So far, the clinical data are compelling, and Wall Street is anticipating that IMC-C225 will get FDA approval. If ImClone's share price drifts lower for no other reason than market sentiment, it could represent a buying opportunity.
Biogen Under Pressure
Then, there's Biogen, which is often considered a one-trick pony because it depends on sales of its multiple sclerosis drug, Avonex, for profitability. However, revenue from Avonex sales could be in jeopardy, as the Swiss company Serono (SRA:NYSE - news - commentary) claims that its drug Rebif is superior to Avonex.
If the FDA deems Rebif the superior treatment for MS patients, then it will be allowed into the U.S. market, where Biogen has control. To make matters worse, analysts are now questioning whether Biogen's new drug, Amevive, is effective at treating psoriasis. Recent results announced at the International Psoriasis Symposium indicate that Amevive may not be as effective as Xanelim, co-developed by Genentech and Xoma (XOMA:Nasdaq - news - commentary), in patient testing. Thus, Biogen is facing competitive pressures from Genentech and Xoma for psoriasis and from Serono for multiple sclerosis.
So, can Biogen sustain growth? Probably, but it's facing an uphill battle to convince Wall Street. Merrill Lynch lowered its rating Monday on Biogen to neutral from accumulate, and so did Lehman Brothers, cutting its rating to market perform from buy.
Biogen's 12-month price target ranges from $126 to $50, and it has lately been skirting the lower end, closing at $54.26 Tuesday. It's expected to report earnings of $1.91 a share this year and $2.15 a share next year. Has Biogen stock hit bargain-basement prices? Based on its chart, it's getting close. Both Merrill and Lehman have an underwriting relationship with Biogen.
Biogen in the Basement
Its stock suffered after two downgrades.
Genentech shares have been struggling in the past year, even though the company has several late-stage drugs in development. Provided Genentech can win FDA approval of its drugs, its share price should revive. Several of its drugs, such as Xanelim, cardiovascular-disease treatment Activase and asthma drug Xolair, look promising. The 12-month price target for Genentech ranges from $111 to $55, and it closed Tuesday at $53.40. The company is expected to report a per-share profit of 75 cents this year and 94 cents next year. Genentech has touted that it's going to achieve double-digit growth based on its product pipeline.
Wall Street can be fickle, but investors should be patient and capitalize on the market's moments of vacillation. If you want to take on biotech plays, you'll need to do homework. These stocks have an added risk factor: Interpreting and understanding medical and scientific jargon can be confusing. However, some opportunities might be worth the extra effort. |
