This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Biotech Stock Mailbag: Celgene, IsoRay, Northwest Bio, Bubble Worries

Stocks in this article: CELG ISR NWBO PRAN GILD

John writes:

I have yet to hear a reasonable explanation for the collapse in biotechs. We know it's not related to any single drug. Does the market believe that Congress has the power to dictate prices to the drug companies? I've heard that they don't. The rotation theory doesn't seem to hold water either. Why would anyone rotate out of a high-growth stock into one with lower growth assuming the same P/E? Is this simply stock manipulation by the big hedge funds attempting to shake out the small guy? Is this about leverage causing an avalanche effect? Is this about foreign ownership selling their shares? Please, I need answers to this madness.

Savvy market participants know Congress lacks the power to regulate drug prices -- today. The concern is more about what happens in the future if drug prices continue to climb and our collective ability to pay for drugs (and all healthcare expenses) can't keep pace. Gilead Sciences' (GILD) hepatitis C drug Sovaldi has become the whipping boy for this drug pricing and reimbursement debate recently -- unfairly, in my opinion. I'd like to see Congress bitch about Vanda Pharmaceuticals (VNDA) pricing a year's worth of me-too melatonin Hetlioz at $80,000!

Investors generally don't rotate out of high-growth stocks unless they're worried about the sustainability of that growth i.e. what happens if the "E" in forward-looking P/Es is about to fall. What's frustrating about biotech investing is fickle sentiment. One day, everyone is happy, focused on stellar, near-term growth -- high P/Es! The next day, investors panic about earnings in 2025, lower P/Es.  

Since the end of February, biotech large-cap P/Es have contracted by about 15% to an average of 19, which puts them on par with the P/E for pharma, according to ISI's Schoenebaum. That's remarkable.

March was a bad month for biotech stocks. No doubt. But April has started on a more positive note, so perhaps the correction or mini-bubble burst is played out. We'll see. Just remember fundamentals and valuation matter.

Lawson H. has a complaint:

When are you going to admit you are a pump and dump artist and take the honorable way our after harming so many people?

Pump and dumper? Me? I thought I was a hedge-fund stooge and biotech basher? Make up your mind!

I don't know. Six months is an arbitrary time period for Northwest Bio  (NWBO) because the only fundamental catalyst which matters -- the phase III study of DC-Vax in brain cancer -- is still enrolling patients (slowly) and won't be completed any time soon. I've explained at length already why DC-Vax is a weak cancer vaccine and won't work. It's in Northwest Bio's interest to extend the brain cancer study as long as possible but failure can't be stalled forever.

Northwest Bio is developing a second cancer immunotherapy -- DCVax-Direct -- which is even more farfetched than the "regular" DC-Vax. Here's how the company describes DCVax-Direct:

DCVax-Direct  is designed for situations in which the tumors are inoperable  where it is not feasible or not desirable for patients to have their tumors surgically removed. This includes situations in which patients have multiple metastases, or for other reasons cannot have their tumors removed. Like DCVax-L, DCVax-Direct also incorporates the full set of tumor antigens  but it does so in situ in the patients body rather than at the manufacturing facility. With DCVax Direct, the fresh, new dendritic cells are partially matured in a special (patent-protected) way so as to be ready to pick up antigens directly from tumor tissue in the patients body, and also communicate the information about those antigens to other agents of the immune system, such as T cells. The partially matured dendritic cells are then injected directly into the patients tumor(s). There, the dendritic cells pick up the antigens in situ rather than picking up the antigens from lysate in a lab dish at the manufacturing facility, as is done with DCVax-L.

Can I be blunt? This is a stupid idea. Cancer grows undetected by a person's immune system, in part, because tumor cells have mechanisms to remain invisible to dendritic cells. With DCVax-Direct, Northwest proposes to take additional dendritic cells and inject them into a tumor, hoping they magically pick up a full set of tumor antigens. This is like Spinal Tap's Nigel Tufnel believing his amp is louder because the volume dial goes to 11.

Northwest is conducting a small, open-label, phase I/II study of DCVax-Direct in patients with inoperable cancers. An abstract has been accepted for June's American Society of Clinical Oncology annual meeting. Undoubtedly, Northwest Bio will seek to hype this inconsequential study. The DCVax-Direct data will go largely unnoticed by the thousands of ASCO meeting attendees because they'll all be flocking to standing room only presentations of truly effective cancer immunotherapies like the checkpoint inhibitors.

2 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs