Feuerstein's Biotech-Stock Mailbag: Navigating the Sector Swoon

I will not predict phase III trials. I will not predict phase III trials. I will not predict phase III trials. I will not predict phase III trials. I will not predict phase III trials. I will not predict phase III trials. I will not predict phase III trials. I will not predict phase III trials.

That's my penance for being oh-so wrong about Progenics(PGNX). (And yes, it won't be long before I break that pledge. Sigh.)

But I roll along, returning to the Biotech Mailbag. (I had to delay my usual weekend offering after being tied up with Genentech's (DNA) investor meeting and the FDA panel meeting on Amgen's (AMGN) anemia drugs late last week.)

There's been a lot of email about the ailing biotech sector, with readers riffing off my somewhat dour musings in last Saturday's Mailbag and my March 11 column looking at the sorry state of the Biotech Buzz Portfolio.

Vic R. writes, "Thank you for putting numbers to my feelings that everyone is avoiding and selling anything biotech. I believe many companies are seriously oversold, but there seems to be no end in sight to when things might change. Your point that selling accelerated into the summer of 2002 has caught my eye and I will try not to double down on the many stocks that are under water until later in this year."

On Friday, I was standing outside the 36th floor ballroom of the Mandarin Oriental hotel in New York City, waiting for the start of the Genentech investor meeting. I was in a crowd of about 300 investors and analysts.

Standing with me were two investors, both friends. Scanning the crowd, one of them remarked, "80% of the people here today won't be around next year."

He was kidding -- sort of. There were a lot of tight, stress-out looking people at this meeting. It hasn't been a good year, with the last month or so being especially bad. I have no way of knowing this for sure, but I'd reckon a guess that most biotech funds are flat to down for the year. The best performers are up marginally.

When Wall Street's biotech pros are sweating, the rest of us best be worried, too.

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Edward D. had this to say: "Thank you for your insightful and useful articles. I have holdings in Celgene(CELG) and Isis Pharmaceuticals(ISIS) and have certainly felt the slump in the biotech sector, but I have chosen to hold onto my positions, at least for the time being. My question is, should I at least give some consideration to doing some bottom fishing to add to my current holdings or perhaps take a position with the likes of Pharmasset(VRUS)?"

It's tempting to buy quality biotech stocks that have been oversold in this year's slump for reasons that have little to do with fundamentals. Biomarin(BMRN) and United Therapeutics(UTHR) come to mind, as do Xenoport(XNPT) and Rigel(RIGL).

Other stocks on my list might include Auxillium Pharmaceuticals(AUXL), Pharmasset and Alexion(ALXN). As well, by now everyone knows I'm a fan of big-cap biotech stocks, so I believe any weakness is a good opportunity to pick up Genentech, Gilead Sciences(GILD) and Celgene.