What a difference a week can make. Without doubt, last week was devastating for biotech.
The Centient Biotech 200™ fell 232 points to 3822, a loss of 5.7% over the five sessions. It was the worst week for biotech in the two and one-half years that we have been keeping records. It was even more negative than the week in early 2005 when Tysabri was pulled from the market, a week that saw only a 4.5% drop. If it is any consolation (and it isn’t much), the setback was more or less in line with the reversals suffered by major market indices: the S&P 500 was down by 4.4% and Nasdaq was off by 5.9%.
The loss means that biotech is now in negative territory for 2007, the first time it has been underwater since the year began. It is down 101 points or 2.6% since January 1. For most of 2007, the CBT 200™ has been closer to its highs than its lows. Now, it is the middle of its 52-week range: the index is 7% below the January highs, and 8.6% above the lows of last July.
Breadth was crushingly negative. Only 17 biotech companies registered a plus sign over the five sessions, while a tremendous 198 biotechs were negative, a ratio of 11.6 losers for every gainer. There were no 10% winners, but a huge number of 75 biotechs made the list of companies falling at least 10%. And the average share of a biotech company (taking away the market capitalization factor of the CBT 200™ index) lost even more: 8.2%.
If there was a ray of hope in all this doom and gloom, it was the IPO market, which has been very resilient over the past six months. Rosetta Genomics (NASDAQ:ROSG) made its debut, taking the usual series of cuts in its pricing, though it did well in subsequent open-market trading. It accepted a price of $7, below its reduced range, but then traded 40% higher. It ended the week at $9.84, a gain of $2.84. To do that, it had to fight a lot of negative market pressure, so it was not a free ride.
Omrix Pharma (OMRI) remains the best-performing IPO from any industry in the last 12 months. It is up 247% since issue. On the other hand, OncoGenex (NASDAQ:OGXI) lowered its range, but still failed to price last week. It remains in limbo. Filing last week were: Sirtis [SIRT], Helicos (HLCS), EndoCeutics [ENCX], and Tongjitang Chinese Medicines [TCM].
It’s hard to talk about winners when the best advance from the CBT 200™ was up less than 10%. That was Epicept (OTC:EPCT), a company with a $42 million market cap and a gain, last week, of just 15 cents. That was enough to give Epicept a percentage increase of 9.9% and an apt symbol for (if this is the biggest gainer…) just how bad things were.
The biggest loser was Threshold (NASDAQ:THLD), which dropped 60%. During the week, the company reported that its lead drug, glufosfamide, failed to provide a statistically significant advantage when added to Gemzar from Lilly (NYSE:LLY). Although glufosfamide remains in other clinical trials, the noose started to tighten around Threshold, which finished the week with a $56 million market cap. It fell $2.24 to $1.49.
Avanir (NASDAQ:AVNR) was also significantly lower, losing 33%. The company said the FDA will require another clinical trial before it approves Zenvia as a treatment for involuntary emotional expression disorder. Avanir fell 71 cents to $1.43, ending the week with a market value of $57 million.
But the factor that really crushed the biotech market last week was a huge number of 73 companies that lost somewhere between 10% and 30% of their value, about one-third of the Centient Biotech 200™, most of them without reporting any negative stories. Could this be perversely positive? After all, biotech wasn’t driven lower by news about a particular company, or even a bunch of companies. The drop in prices was a reaction to a stock market that, across the board, wanted to reduce its risk.