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Biotech / Medical : The thread of life -- Ignore unavailable to you. Want to Upgrade?

To: zeta1961 who wrote (1205)	12/11/2006 9:59:57 AM
From: Doc Bones	Read Replies (1) \| Respond to of 1336

To Everything There Is a Season, And Biotech's Is Just About Over COMMENT FROM breakingviews December 11, 2006 There are two ways to invest successfully in biotech. One takes a wealth of scientific knowledge and a lab coat. The other simply requires a calendar. Over the past 18 years, biotech stocks have produced annual returns of 17%. However, the bulk of that has come between August and the year end. The American Stock Exchange Biotech index has returned only 5% over the rest of the year. Owning biotech over the last five months of the year looks even better on a risk-reward basis. It would have lost money only once over nearly two decades. Investing in biotech from January to July would have resulted in losses on 10 separate occasions. So what explains this curious seasonal effect? Biotech stocks are driven by news. Demand for drugs isn't economically cyclical -- the most important facts for investors are how effective a new drug is in relation to its side effects, and whether it will be approved by regulators. While negative data are likely to be presented at any time of year, good news tends to arrive during the autumn. Biotech firms prefer to present findings at conferences heavily attended by doctors. The most important, such as the American Society of Hematology conference that began in Orlando, Florida, over the weekend, take place toward year end. Successful trials are given greater prominence at such powwows. Furthermore, good news for biotech firms from regulators normally comes later in the year. Many companies rush to file with the U.S. Food and Drug Administration by the end of December or shortly after; it looks better in annual reports to say a drug is awaiting approval. The pattern is evident this year. After falling 6% in the first part of the year, the biotech index is up 21% since August. Based on past performance, it should make sense for investors to sell in January and stay away until late summer. Anyone following this strategy over the past 20 years would have made nearly four times as much as those who bought and held biotech stocks for the entire period. [snip] ---- Robert Cyran, Edward Hadas and Alina Trabattoni, Simon Nixon online.wsj.com