Biotech Rises To New Record High

So far in 2007, it has been a clean sweep for biotech. In each of the three weeks of the year, the Centient Biotech 200™ has posted a gain. Last week, the CBT 200™ climbed another 34 points to 4112, a gain of .83%. That was enough to establish an all-time high, eclipsing the highs set in March of 2006.

As a further feather in its cap, biotech made those gains without any help from the broad market: the S&P 500 was flat last week and Nasdaq fell more than 2%. With the latest increase, the CBT 200™ is up almost 5% in the first three weeks of the year. In the last two years, January has been tough for biotech, so this is a welcome change.

Breadth, however, was a considerable fly in the ointment, failing to confirm the movement in the biotech index. There were 92 biotech companies that moved higher, which was outpaced by the 122 biotech that gave up ground, a ratio of 1.2 decliners for every advancing issue. In the group of biotech stocks with large changes in value, the mixture came out exactly even. A total of 7 companies gained 10% or more, exactly equal to the number of companies that lost a double-digit percentage.

The average share of a biotech stock (taking away the market capitalization factor of the index) lost .30%. That number shows the big cap biotechs had a fairly good week, while the small caps did not. Genentech (DNA) was up 2.6%, and Amgen (AMGN) gained 1.3%, enough to explain part of the breadth divergence, but not all of it.

Next week, earnings season begins in earnest, with many big pharmas reporting, plus our favorites Amgen, ImClone (IMCL), Celgene (CELG), Johnson & Johnson (JNJ) and Arena (ARNA). For anyone who wants a more complete picture of the reporting schedule, we have put a current earnings calendar in the Contents box in the right column of the Centient website.

Also next week, Oculus (OCLS), a drug/device company is scheduled to make its IPO, having been held over from the previous week. Oculus makes a wound cleaning solution. In the following week, XTENT [XTNT] is on the docket. XTENT is developing a drug eluting stent, and if it manages to price at the midpoint of the proposed range, the company would have a market value of $415 million.

Filing to make their IPOs were 3SBio [SSRX] and CardioMEMS [SENS]. 3SBio is a Chinese biotech that is developing protein-based products to fight infectious diseases. The company will offer 7.7 million ADSs in a $12-$14 range, giving it a market cap of $280 million at the midpoint. CardioMEMS develops miniature wireless sensors to monitor chronic cardiovascular diseases. It will announce terms at a later date.

The 2006 IPO Class continued to do well, rising 1.4% last week. That brought the average in their post-pricing value up to an increase of 45%. Emergent Biosolutions (EBS) led the list higher with an 18.6% gain. The immunotherapeutics company, which has a $416 million market cap, guided analysts higher with an estimate of $150 million in revenue for 2006. Vanda Pharma (VNDA) rose 16%. The company raised $96.2 million in new cash, nine months after its IPO, and said it would seek to partner its sedative drug candidate.

On the CBT 200™ list, the biggest winner was Corautus [VEGF] with a 62% gain. But that supposedly huge gain is misleading because the company is pretty much out of business. It has a market cap of only $12 million and a stock price of just $.60. Corautus moved higher after announcing it was in merger talks with a privately held biotech company.

In second place, Ciphergen (CIPH) was up 26%, rising 29 cents to $1.39. The $50 million company announced two weeks ago that it would work with Quest Diagnostics (DGX) to develop a blood test for peripheral arterial disease.

Neurocrine (NBIX) was 13.5% higher. The company still has a $496 million market cap, even though it fell precipitously last spring when the FDA refused to grant outright approval for Indiplon, its sedative drug candidate. The company received a recommendation from Lehman Brothers last week, and Neurocrine announced positive results from a test of an endometriosis drug two weeks ago. Neurocrine rose $1.56 to $13.10.

Genitope (GTOP) was up 12.6% without releasing any news. At the beginning of 2006, Genitope was changing hands at close to $10 per share. In July, when the data safety monitoring board said it recommended continuing a trial of MyVax for non-Hodgkin’s lymphoma (rather than ending the trial early), the stock hit a low of $2.25. Last week, Genitope climbed 45 cents to $4.02, giving the company a market value of $144 million.

German biotech GPC Biotech AB (GPCB) added on 11.2% last week on no news. GPC is developing satraplatin, an oral platinum-based drug for prostate cancer that is in Phase III trials. GPC in-licensed the drug from Spectrum Pharma, with whom it is currently in dispute over payments. The company is up from a low of $13.15 at mid-year. The $969 million GPC rose last week by $2.92 to close at $29.13.

Disclosure: Centient management holds a position in Genentech shares and does consulting work for Genentech.