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Feuerstein's Biotech-Stock Mailbag

Dear readers, I am a genius! I know, I'm modest too, but how else do I describe the sheer brilliance that went into timing three recent columns on the depressed state of the biotech sector? I totally called the bottom.

It started with a dour March 8 Mailbag. On March 11, I lamented the 20% loss in the Biotech Buzz Portfolio. I followed that uplifting tome with a downer Mailbag on March 17 discussing how biotech investors were in a world of hurt.

Well, I guess all the hand-wringing about how bad it was in biotech-land signaled the nadir, because the sector started moving up on March 17 and it's looked pretty good since. As of April 3, the Biotech Buzz Portfolio is down just 900 basis points. Can you say comeback?

If those buzz stocks aren't your idea of a perfect proxy for the health of the biotech sector, do consider that both the iShares Nasdaq Biotechnology ETF (IBB) and the Amex Biotechnology Index (BTK) are also on the rebound. While still down for the year, the IBB and BTK continue to outperform the broader stock indices.

We're not out of trouble yet by any stretch, but hey, it doesn't look like Armageddon either.

Before I go any further, I have to give major props to one reader in particular. Remember Andrew B? Here's what he said in my March 17 Mailbag:

"By the way, given your negativity and that of all the people you talk to, it's the perfect contrarian indicator. It may finally be time for Big Pharma to go on that long-rumored buying spree, especially for European Pharma with the dollar so low.

"With the short covering that will go along with it, I think biotech may be set afire in the next few months. Hell, when the bubble bursts in oil, gold and agriculture, people will have to go to the next roulette table. Maybe that will even be biotech, which really hasn't seen that in about a decade. You heard it here first."

Nice call, Andrew!

Perhaps I should turn over my laptop to Andrew, since he seems to know the score better than I do. Here's what he had to say this week:

" Nasdaq and Dow soaring, but guess what's up more? The BTK!!! Again, I'm no technician, but it seems like a breakout of a downtrend on the BTK, while the Nasdaq rally technically doesn't seem to mean much.

"Now, the coup de grace will be something big, like Enzon (ENZN) capitulating to Carl Icahn and getting a high price, or maybe Biogen Idec (BIIB) or PDL Biopharma (PDLI) getting a buyout offer after saying they're no longer for sale. Maybe biotech isn't dead after all."

Alright Andrew, give me back my Mailbag.

Kent P. writes, "Is this a good time to sell Onyx Pharmaceuticals (ONXX) now, or is more good news coming our way."

I'm inclined to say hold on to Onyx. I like the recovery in the stock from $25 last month to where it sits now around $32. Nexavar is a good cancer drug. The setback in lung cancer hurt, but I think the opportunity in liver cancer is very much there and not fully reflected in the stock price at this time.

Just as important, I'm hopeful that new CEO Tony Coles, who just started this week, is going to bring some new energy into the company. Let's also hope that he does something to ratchet back spending or otherwise ensure that Nexavar's success is reflected in Onyx's bottom line -- and soon.

I haven't had a chance to speak with Coles yet, but conversations with other executives there, as well as with some significant institutional investors who own the stock, make me cautiously optimistic that Onyx has heard the criticisms and will make some changes.

Here's a factoid that may interest only me, but I'll share anyway: I wrote my first significant story on Onyx way back in November 2002. At that time, Nexavar was only just moving into its first phase III study; the stock was at $6; the market cap a tiny $132 million.

As I also pointed out in that story, by comparison, Telik (TELK) sported a market cap of $464 million. Genta's (GNTA) market cap at that time: $828 million!

Wow! Times sure have changed.
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