Biotech Will Miss Its Annual Boost From Fall Meetings

Important biotech conferences and meetings are being canceled or postponed due to last week's terrorist attack, robbing the sector of the sparks needed to help ignite a year-end rally.

The fall calendar is usually chockfull of market-moving biotech events that drive stocks higher. So the absence of these events -- at a time when the biotech sector is already under tremendous pressure -- is not helping matters.

The American Stock Exchange Biotech Index was down another 3% Tuesday, after falling almost 8% Monday. The index is now down more than 30% for the year.

In each of the last 10 years, the index has finished the year above its level on Aug. 1. Biotech observers attribute much of this performance to the importance of the buying catalyst caused by the dense slate of fall meetings and conferences. The FDA also uses the fall months to clear its books of remaining drug-approval decisions. Before the terrorist attack, the index was just 5% below the Aug. 1 benchmark. Now, it's 16% below that level.

"The terrorist attack makes any analysis of historical performance irrelevant," says one biotech hedge fund manager. "We have to operate under new assumptions and be realistic that the biotech sector is not going to finish the year very strong."

Bear Stearns canceled its biotech conference last week in New York, naturally, because of the attacks. On Monday, a well-attended scientific conference scheduled to begin Sept. 22 in Chicago was postponed until December.

Biogen (BGEN Quote) has postponed its analyst meeting set for later this month in Boston, while other biotech companies are waiting for the Food and Drug Administration to reschedule advisory panel meetings in Washington, D.C., to review new drug applications.

Legg Mason Wood Walker biotech analyst Stefan Loren says the rescheduling of biotech medical conferences will be a signal of a sector recovery, albeit a later-than-normal one.

"There are still a lot of scientific conferences coming up. I'm not talking about investor conferences because those are getting pushed, but scientific conferences that are being delayed but will go on," he says. "Also, look out for when the FDA starts to reschedule meetings. We want to see the system start to get back to normal and see data come out again."

But it could take a while for the FDA to reschedule these meetings because it is difficult, logistically, to bring people in from across the country. Eli Lilly's (LLY Quote) Sept. 12 FDA advisory panel meeting for its new sepsis drug has not been rescheduled and it may be six weeks before a new date is set.

Guilford Pharmaceuticals(GLFD Quote) is also waiting for the FDA to reschedule an advisory panel meeting.

But the FDA is not totally frozen, as evidenced by Tuesday's approval of Amgen's(AMGN Quote) new antianemia drug Aranesp.

Biotech mavens believe the sector's fundamentals remain strong, and that a recovery will happen. But there is no clear consensus as to how the recovery will form or when it will happen.

John McCamant, editor of the Medical Technology Stock Letter, is looking at the broader Nasdaq for clues.

"Unfortunately, biotech is a hostage of the Nasdaq right now," he says. "I was hoping, before last week, to see a Nasdaq bounce this fall that would bring biotechs with it."

Jon Alsenas, fund manager with ING Furman Selz Asset Management, is looking for relatively advanced mid-cap biotech companies to lead the sector out of its gloom -- companies like CV Therapeutics(CVTX Quote), Cubist Pharmaceuticals(CBST Quote), Gilead Sciences (GILD Quote) and Scios(SCIO Quote), which have drugs in late-stage development or sitting at the FDA awaiting approval.

"In markets like this, these companies will go down, but they're much more predictable and reasonably priced," Alsenas says. "They may give back some now, but on the next positive move they will come right back and let investors make some money." Alsenas is long CV Therapeutics.

Alsenas is purposely staying away from big-cap biotechs like Amgen, Genentech(DNA Quote) and MedImmune(MEDI Quote) because he feels they're overvalued already. Any hiccups in their revenue or earnings stream will cause investors to flee further.

But Legg Mason's Loren, while sympathetic to the argument against big-cap biotechs, nonetheless is looking for these stocks to lead the recovery.

"The advantage is that they are highly liquid vehicles," he says. "They're more stable, they tend to have drugs on the market, and while we're convinced that drugs do show some elasticity in a bad economy, they're not very elastic. It's not the same as a consumer deciding to buy a car or going on vacation -- most people will still take their drugs as scheduled."