Rough Week for Biotech

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 (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 (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 (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 (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 (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 (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.

Disclosure: none.