"The reasons are fairly obvious: A nasty stock market and looming threat of recession has put investors in a foul mood. In this atmosphere, risk is most definitely a four-letter word, so there are few institutional investors willing to take on even more by loading up on risky small- and mid-cap biotech stocks."The situation for small-cap biotech looked bleak then, but I don't think anyone fully knew how bad it would get after Lehman Brothers filed for bankruptcy Sept. 15, causing the whole market to collapse. Many small and early-stage biotech stocks are down 50% to 60% or more in 2008. Big-cap biotech did offer some measure of protection this year. Generally I was right to recommend Gilead Sciences ( GILD - Get Report) and Celgene ( CELG - Get Report) for most of the year, although both stocks took hard hits in the fall. Being an Amgen ( AMGN - Get Report) bear worked well in 2007, but not so much in 2008, where I wasn't quick or astute enough to pick up the profitable midyear turnaround in the stock. When it comes to stock-specific calls, I did well with bearish predictions for Elan's ( ELN) Alzheimer's drug bapineuzumab and the prostate cancer vaccine from Cell Genesys ( CEGE). I wasn't a fan of Vanda Pharmaceuticals ( VNDA) and rightly predicted the demise of Myriad Genetics' ( MYGN) Alzheimer's drug Flurizan. I growled the loudest over Introgen Therapeutics ( INGN) and, finally, the company blew up spectacularly. Optimer Pharmaceuticals ( OPTR) was a great long pick in the Biotech Select model portfolio, and a short recommendation in Medicines Co. ( MDCO) also worked out very well.
It's report card time. I've been going over a year's worth of biotech columns to grade my hits and misses for 2008. My best call this year was more directional than stock-specific. In mid-February, I reported how the empty rooms and lack of investor interest at the BIO CEO investor conference was a red flag for small-cap biotech stock investing in 2008. As I stated at the time:
I was early in predicting that ImClone Systems would be bought for $70 a share, although I had no idea the acquiror would be Eli Lilly ( LLY - Get Report). As for columns and calls I wish I could take back, there was my prediction for a profitable sale of Middlebrook Pharmaceuticals ( MBRK) to some larger specialty pharmaceutical company. That takeout never happened. I was a big fan of Progenics ( PGNX) based on high hopes for the commercial launch of its bowel drug Relistor. Unfortunately, doctors haven't been as excited about the drug as me. I boldly predicted the October and December approval of AMAG Pharmaceuticals' ( AMAG - Get Report) iron replacement therapy ferumoxytol. Neither happened, although I believe the third shot at approval early next year will be the charm. Or, so I hope. Grading that last call will have to wait for next year's report card. Happy New Year!