Updated from 12:21 p.m. EDTThe biotech sector was already in rally mode in recent weeks, but the decidedly upbeat news released at this year's meeting of the American Society of Clinical Oncology provided an additional lift to the group on Monday. Many biotech stocks finished off their highs of the session, as the group fell victim to the same late-day sluggishness that hit the broader market, but on the whole, the sector was still positive. Vion Pharmaceuticals ( VION), Genentech ( DNA) and Millennium Pharmaceuticals ( MLNM) were among the names climbing to start the week, but one of the biggest winners of the day was ImClone Systems ( IMCLE). ImClone's European partner, German drugmaker Merck KgaA,
Continuing the RunThe biotech stocks have been enjoying solid gains lately, thanks to anticipation before the ASCO meeting, strong earnings from the group, short-covering and the belief that the FDA is trying to get new drugs approved faster. (Columnist Adam Feuerstein attended this year's ASCO meeting, and his coverage appeared on both TheStreet.com and RealMoney.com.) Vion rose $1.06 to close at $2.30, a gain of 85%. Genentech gained 7% to $66.73, and Millennium was higher by 3% at $15.97. As for Genentech, analysts are so far positive on the company's
Last week, CIBC World Markets
downgraded Genentech , saying its stock price has run up too much. On Monday, RW Baird cut the stock to neutral from outperform, but did raise its price target to $60 from $50. UBS PaineWebber took a different approach, raising its price target on Genentech to $100 from $75. On Street Insight, a sister site to TheStreet.com, contributors were considering the effects of the ASCO meeting and the current environment for biotech stocks. Jim Gulbrandsen, the managing partner and founder of Silvertree Management Group and general partner of Silvertree Equity Partners I, a hedge fund based outside San Francisco, wrote that "'too far too fast' is definitely in my mind as it relates to biotech." He also wrote that "there could be some digestion in coming days, but I contend that we are in the top of the 4th inning. The momentum crowd has been jumping all over the group, but for the first time in years I believe the mutual funds will have to pay attention to biotech. Whether they should go higher or not, they will. Volatility will set in very soon, but I will be buying significant selloffs, including the predictable ASCO selloff (too predictable?)." Sally Yanchus, an analyst and consultant for health care clients, and also a contributor to Street Insight, wrote that she was "less inclined to believe that the biotech group will experience a harsh selloff post-ASCO" for two reasons. "The FDA's new position on the drug-approval process will result in an acceleration in approval times, which is arguably the single biggest fundamental positive for pharma and biotech companies," she wrote.
The second issue, she wrote, is simple supply and demand. "
T here are few sectors other than biotech to put growth money, and this I believe could continue to drive valuations into the stratosphere," Yanchus contended. "For this reason, I would not be aggressively short anything yet." Wall Street's elevated expectations . Amgen ( AMGN) dropped almost 2%, and Genzyme ( GENZ) fell nearly 5%. Other stocks gaining ground included OSI Pharmaceuticals ( OSIP), up 7% to $28.25; Dendreon ( DNDN), climbing 5% to $6.58; Antigenics ( AGEN), higher by 9% to $13.37; and Protein Design Labs ( PDLI), better by 9% at $15.46. Ribapharm ( RNA), Affymetrix ( AFFX) and Ilex Oncology ( ILXO) also were among the advancing issues.