(Editor's Note: Come see Adam Feuerstein at the Money Show in San Francisco. Adam will be speaking to attendees on Friday, Aug. 8, at 2:15 p.m. ("Biotech Investing for Individuals: How to Turn Geeky Science Into Fat Profits"); again on a lunch panel on Saturday, Aug. 9, at 12:35 p.m. ("Tech and Biotech: Picks and Pans for 2008 and Beyond"); and again on Sunday, Aug. 10, at 8 a.m. ("Biotech Investing for Individuals: How to Turn Geeky Science Into Fat Profits").The biotech sector will remain a tough spot for investors in the second half of the year. Not exactly an upbeat start to a column, I realize, but the first six months in biotech-land left many investors with flu-like symptoms. The prognosis for the second half of the year isn't looking much better. How should investors inoculate themselves from the malaise? Stick to what's worked so far. With investors still steering clear of adding more risk to their already risk-saturated portfolios, large-cap and profitable biotech stocks -- Celgene ( CELG, Gilead Sciences ( GILD and Genentech ( DNA in particular -- have been a safe haven, outperforming their mid- and small-cap peers. Amgen ( AMGN - Get Report), for all of its well-documented troubles, may have finally attracted the attention of value investors, although there is still risk ahead with the expected data release from pivotal studies of its osteoporosis drug denosumab. Mid-cap biotech stocks have been a mixed bag, generally trading flat to slightly down through the first six months of the year. Stock-moving catalysts, whether phase III trial data, new drug approvals or stronger-than-expected sales and earnings, are definitely the keys to this group. Elan ( ELN and Vertex Pharmaceuticals ( VRTX - Get Report) have been winners so far this year, as has United Therapeutics ( UTHR. Stocks like Onyx Pharmaceuticals ( ONXX, OSI Pharmaceuticals ( OSIP, Cephalon ( CEPH and BioMarin Pharmaceuticals ( BMRN - Get Report) are all fundamentally strong performers that need one or two events to go their way to make a move back into positive territory for the year. The outlook for small-cap and development-stage biotech stocks isn't all that bright. This is where investors have lost big money this year, for reasons easily understood. Most of these stocks are too risky, with drugs in development too far from the finish line and requiring too much money for investors to get excited about at present.
|Potential Drug Approvals -- Second Half 2008 |
|Expected Approval Date||Company||Drug||Indication|
|Ongoing||Cardiome Pharma||Kynapid||Acute atrial fibrillation|
|8/30||Introgen Therapeutics||Advexin||Head and Neck Cancer|
|6/30 (Europe)||Progenics Pharmaceuticals||Relistor SC||Opioid Induced Constipation|
|7/21||Theravance||Telavancin||Skin and Skin-Structure Infections|
|7/23||Amgen||Nplate||Immune Thrombocytopenic Purpura (ITP)|
|7/27||Vanda Pharma/Titan Pharma||Fanapta||Schizophrenia|
|8/11||Gilead Sciences||Viread||Hepatitis B|
|8/29||Johnson & Johnson||Paliperidone palmitate||Schizophrenia|
|8/31||BioDelivery Sciences||BEMA Fentanyl||Pain|
|August||The Medicines Company||Cleviprex||Hypertension|
|9/16||Gilead Sciences||Aztreonam lysine||Cystic Fibrosis|
|9/15-9/30||Celgene||Vidaza||Myelodysplastic Syndrome (MDS)|
|10/4||Johnson & Johnson||Ustekinumab||Psoriasis|
|10/14||Lev Pharmaceuticals||Cinryze||Hereditary angioedema (HAE)|
|10/19||AMAG Pharmaceuticals||Ferumoxytol||Anemia Due to Chronic Renal Failure|
|10/31||Cephalon, Inc.||Treanda||Non-Hodgkin's Lymphoma (NHL)|
|10/24-10/31||Cypress Bioscience/Forest Labs||Milnacipran||Fibromyalgia|
|12/8||Targanta Therapeutics||Oritavancin||Skin and Skin-Structure Infections|
|10/01-12/31 (Europe)||BioMarin Pharmaceutical||Kuvan||Phenylketonuria (PKU)|
|11/01-12/31||Dyax||DX-88 (Subcutaneous)||Hereditary angioedema (HAE)|
|Source: BioMedTracker, company reports|
|Phase III Clinical Trials -- Second Half 2008 |
|Expected Date Range||Company||Drug||Indication|
|Third Quarter||Accentia Biopharmaceuticals||Biovaxid Vaccine||Non-Hodgkin's Lymphoma|
|Third Quarter||Alexza Pharmaceuticals||AZ-004||Schizophrenia|
|Third Quarter||Altus Pharmaceuticals||Trizytek||Exocrine Pancreatic Insufficiency|
|Third Quarter||AstraZeneca||Zactima||Non-Small Cell Lung Cancer|
|Third Quarter||ImClone Systems||Erbitux||Non-Small Cell Lung Cancer|
|Second Half||MannKind||Technosphere||Diabetes Type 1 and 2|
|Second Half||OSI Pharmaceuticals||Tarceva||Non-Small Cell Lung Cancer|
|Fourth Quarter||SciClone Pharmaceuticals||Zadaxin||Hepatitis C|
|Second Half||Sciele Pharma||PSD502||Premature Ejaculation|
|Third Quarter||Titan Pharmaceuticals||Probuphine||Drug Addiction|
|Second Half||Cell Therapeutics||Pixantrone||Non-Hodgkin's Lymphoma|
|Fourth Quarter||Anesiva||Adlea||Pain Indications|
|Fourth Quarter||Dendreon||Provenge||Prostate Cancer|
|Second Half||Genentech||Avastin||Adjuvant colon cancer|
|Fourth Quarter||United Therapeutics||oral Remodulin||Pulmonary Arterial Hypertension|
|Fourth Quarter||Jazz Pharmaceuticals||JZP-6||Fibromyalgia|
|Fourth Quarter||Repros Therapeutics||Proellex||Uterine Fibroids|
|Source: BioMedTracker, company reports|
- Elan and Wyeth (WYE will be presenting data from their phase II study of bapineuzumab in Alzheimer's patients on July 29 at the International Conference on Alzheimer's Disease in Chicago. Also at this conference, on July 30, Medivation (MDVN will also present 18-month follow-up data from a phase II study of its drug Dimebon.
- Final "SVR" or cure rate, data from Vertex Pharmaceuticals' phase II study of telaprevir in treatment-resistant hepatitis C patients, are expected in the fourth quarter.
- Trastuzumab-DM1 breast cancer data from Genentech and Immunogen (IMGN, in the fourth quarter. Also look for Genentech to make a go/no-go decision on moving this drug into phase III studies as it's an important catalyst for Immunogen.
- From Cardiome (CRME, new data on oral vernakalant for patients with chronic heart arrhythmias.
- Can Sangamo BioScience's (SGMO zinc finger protein drug SB-509 really repair and regenerate nerves in diabetic neuropathy patients? We'll get the first solid indication when phase II data is released towards the end of the year.
- The iShares Nasdaq Biotechnology ETF (IBB closed the first six months of 2008 down 5%; the Amex Biotech Index was down 7%. That's not great, but it's a better than the broader indices. As I said above, however, digging deep into the performance of biotech stocks reveals a disparity -- large-caps were up, while small- and mid-caps were down, some heavily.
- Fund flow analysis shows an outflow of investor money coming from biotech in 2008, continuing a 2007 trend, according to data compiled by JP Morgan's biotech analyst Geoffrey Meacham.
- The biotech sector has raised about $6.5 billion year to date, including proceeds from initial public offerings, follow-on offerings, venture capital and other forms of financing such as partnerships. This financial activity, however, is well off the pace of last year, when the sector raised $30.6 billion total, according to BioCentury Online Intelligence. This reflects the difficult credit environment and means that biotech companies in need of cash are finding it harder to raise money -- something for investors to keep in mind.
- For every one biotech and drug stock with positive returns in the first half of 2008, there were three such stocks with negative returns, according to Capital IQ.
- Top-performing stocks in the first half included Iomai (up 531% on a buyout), Idenix Pharmaceuticals (IDNX (+169%), IDM Pharma (IDMI (+ 159%). Other notables include Elan (+67%), Vertex Pharma (+44%), Celgene (+38%) and Pharmasset (VRUS (+39%).Medicure (MCU topped the list of disaster stocks with a 96% loss in the first six months. It wasn't pretty for cancer vaccines stocks Genitope (GTOP and Favrille (FVRL, down 94% and 95%, respectively.
- Will mergers and acquisitions give a lift to the biotech sector? Perhaps, but deal flow has been relatively scarce and hasn't really provided any meaningful boost to date.The GlaxoSmithKline (GSK takeout of Sirtris and Takeda's purchase of Millennium Pharmaceuticals made for some great headlines, but neither deal really motivated investors to look for other takeout-worthy biotech stocks. As JP Morgan's Meacham pointed out, the sector barely budged after both deals were announced. In fact, the biotech indices sold off after the Millennium takeover.
- Hey, there's a presidential election under way, in case you forgot. At the very least, all the talk about reining in drug pricing, fixing the health-care insurance system and the coming of bio-generics are a headline risk and a distraction for investors.
- The FDA still seems under-staffed and highly sensitive to criticisms that it's approving dangerous drugs. A conservative FDA is not a biotech investor's friend.