Here's what Reuters had to say about the sector a few days ago:
By Ransdell Pierson NEW YORK, Aug 19 (Reuter) - The biotech sector just
can't get any respect this year, with the market dwelling on a plethora of
drug setbacks but overlooking many of the group's successes.
And the market's earnings-driven hunger for big-capitalization stocks has
helped render the biotech sector, dominated by tiny research companies with
net losses rather than earnings, virtually an abandoned orphan.
It has woefully lagged the broad bull market, with the American Stock
Exchange Biotech Index rising only 7.2 percent in the past 12 months versus a
37 percent gain for the S&P 500 composite index and a 39 percent advance for
the Amex Pharmaceuticals Index.
David Molowa, a Bear, Stearns pharmaceuticals analyst, said one of the
biggest obstacles facing biotech companies is the market's continuing
obsession with big-cap stocks and their positive earnings momentum.
"The small-caps have lagged and should start to outperform their big-cap
brethren, but nobody's certain when that's going to happen," he added.
One of the year's biggest clinical setbacks came August 15, when Amylin
Pharmaceuticals Inc <AMLN.O> said late-stage Phase III trial data showed weak
results for its diabetes drug candidate, pramlintide. Share prices promptly
fell over 40 percent to 8-1/2.
A series of other failed clinical trials or regulatory disappointments in the
biotech sector this year has also greatly unsettled investors, said David
Crossen, a Montgomery Securities pharmaceuticals analyst.
"It just reminds people there's all this inherent risk in this group, so
people shy away from it. It's a herd effect," he said.
Among the biggest disappointments: --On April 21, shares of AutoImmune
Inc <AIMM.O> tumbled 68 percent -- to 4-5/16 from 13-3/4 -- after the company
said late-stage trials showed its lead drug for treating multiple sclerosis,
Myloral, was no better than a placebo -- an inert substance taken by a
control group.
On May 8, a U.S. Food and Drug Administration advisory panel voted to
recommend against marketing approval for Myotrophin, Cephalon Inc's <CEPH.O>
candidate drug for amyotrophic lateral sclerosis (ALS), or Lou Gehrig's
disease.
Cephalon immediately tumbled from $20 a share to $13, and has since edged
lower to $10. The FDA, which usually abides by recommendations of its
advisory panels, is scheduled to decide by November 11 whether to approve
Myotrophin.
On May 12, AutoImmune announced a new misfortune: Phase II trials of its drug
for rheumatoid arthritis, colloral, showed its effect on patients was
statistically no different than a placebo.
On June 25, Liposome Co <LIPO.O>, one of the most closely followed biotech
stocks, announced its Ventus drug for acute respiratory distress syndrome
(ARDS) failed its pivotal Phase III clinical trial.
Liposome, whose chairman had predicted a $1 billion annual market for the
drug, saw the company's stock plunge more than 60 percent by the end of the
trading day.
"The negative Myotrophin news set the stage for people to doubt the whole
biotech sector," said Harry Tracy, editor of NeuroInvestment newsletter.
"It's one company, one drug, one decision. But for whatever reason people
seem to use it as a bellwether for the whole sector. And it makes no sense
because there are a lot of other positive things going on," Tracy told
Reuters.
"It's been very much like 1994, bad news after bad news with dozens of
disappointments ranging from revenue shortfalls to failed Phase II and Phase
III clinical trials," said Mark Simon, a Robertson Stephens pharmaceuticals
analyst.
Simon said another negative factor has been the sluggish performance this
year of established biotech leaders such as Amgen Inc <AMGN.O>, Chiron Corp
<CHIR.O>, Biogen Inc <BGEN.O> and Genzyme Corp <GENZ.O>.
"None of them have had a great year and it's unclear where their next
blockbuster drugs are going to come from," Simon said. "And when investors
aren't making much money on the big liquid biotech stocks it biases them
against the small ones."
On the other hand, Simon and Crossen agreed the sector's image has been
burnished by three emerging biotech leaders: BioChem Pharma <BCH.TO>, Agouron
Pharmaceuticals <AGPH.O> and Centocor Inc <CNTO.O>.
Centocor is riding high from sales of heart drug ReoPro, marketed by Eli
Lilly and Co <LLY.N>. BioChem Pharma is financing an ambitious drug pipeline
from royalties on sales of its HIV/AIDS treatment, 3TC, marketed by Glaxo
Wellcome Plc <GLXO.L>. Both drugs were launched in 1995.
"Biochem Pharma and Centocor are doing exceptionally well and next year are
expected to do even better, which will help the biotech group come back,"
Crossen said.
He added Agouron was also "transitioning into a leadership position"
following its launch in late 1996 of Viracept, a protease inhibitor to
control the AIDS virus. Agouron predicts Viracept sales in fiscal 1998 could
reach $250 million.
But overall, Tracy said investors still seemed to be going out of their way
to ignore good news about many other promising companies.
For example, he said shares of Interneuron Pharmaceuticals Inc <IPIC.O> have
barely budged since the company last month announced favorable results in its
second Phase III clinical trial for citicoline, its drug candidate for
stroke.
"Here's a drug with almost no toxicity that may have a market of $300 million
to $400 million by the year 2000. And people didn't respond," Tracy said,
noting the company has said it intends to file a new drug application with
the FDA later this year.
15:48 08-19-97 |
