Some Biotech Stocks Set to Get Booster Shots

Promising new drugs may give companies like Gilead, Immunex and ICOS a new lease on life.
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Considering all of September's events, it's not a surprise that many companies' valuations took a wallop, biotechs included.

But has the market hit bottom? I can't predict that, but there are someinteresting signs to consider.

Gilead

(GILD) - Get Report

, which I

wrote about in late August, is an example. I thought highly of the company at the time, but suggested to investors that they wait for the hype to cool down before buying its shares. Well, its share price has dropped, but the story hasn't changed -- it's still an appealing company with promising growth, and now its share price is at an attractive entry point.

This week, though, Gilead's drug to treat HIV, Viread, will be

reviewed by U.S. regulators. In tests, Viread taken together with other antiretroviral drugs has been shown to help reduce levels of the HIV virus. I expect Gilead shares to go up on positive news, and, once again, investors should wait till the frenzy has cooled and shares fall back on profit-taking.

The same goes for

Immunex

(IMNX)

. It has a great product on the market, Enbrel, which treats rheumatoid arthritis. As I mentioned in late July, I believe the worst is over for the company and the downside risk is at a minimum. More importantly, it's still not too late to get in.

Then there is

ICOS

(ICOS)

, which has Cialis, a male impotence drug awaiting approval from the Food and Drug Administration. ICOS' fundamentals haven't changed since the attacks, and the pullback in its share price is influenced by market sentiment. In my opinion, new money looking for growth should look closely at ICOS' share price under $50 as an opportunity.

A company that I haven't mentioned before is

SangStat

(SANG)

, which is developing drugs to help in organ transplants. Its shareprice has remained steadfast, even though it's expected to post a loss forthe remainder of the year. But 2002 is a different story: The company expects to be profitable, with an earnings estimate of 19 cents a share for the year.

It appears SangStat will reach that goal, as the company has beat expectations for the past three quarters. For the third quarter, analysts are expecting a loss in the range of 7 cents to 9 cents a share. At the currentlevels, though, interested investors should wait for its shares to pull back because I do think it's a bit expensive for a company whose year-to-date revenueis only about $41 million.

The question still remains, though -- have the biotechs hit bottom?In these uncertain times, investors will react negatively tobiotech companies that aren't generating any revenue or earnings. Those companies will be susceptible to price drops as the market feels theneed to rotate money in and out of sectors. Quality biotech stocksthat generate revenue or have milestones pending in the nearterm will probably feel the stress, but they should recoverrapidly.

For now, though, the focus is on earnings season, and all ears are waitingto hear news about third-quarter earnings. If the news is decent, then youcan bet that sector analysts and Wall Street will announce that the biotechsector is alive and well. Therefore, I'm betting that values of top-notchbiotech companies will climb back to the share prices they were at prior toSept. 11. There will be volatility within the marketplace, but much ofthe economic disruption that is happening should already have been factoredinto the market.

We are in tough and uncertain economic times, but for the biotechs, thefundamentals remain in place as new drugs continue to be sought anddeveloped.

Nadine Wong is the editor, publisher and co-founder of the

BioTech Sage Report

and a biotech columnist for

worldlyinvestor.com

. At the time of publication, Wong was long Immunex, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While she cannot provide investment advice or recommendations, Wong invites you to send comments on her column to

Nadine Wong.

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