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The best thing about last week was that it was better than the week before. After dropping 5.7% two weeks ago, the Centient Biotech 200™ stopped dead in its tracks (using the picturesque phrasing of old-time Westerns), gaining just one net point over the five sessions to end at 3823, a rise of .03%.

That was not very exciting in itself, but complacency was a welcome relief to the horrifying excitement offered by the previous week. Biotech remains in the middle of its 52-week trading range, 8.7% above the lows of last July, but 7% below the highs of January.

A flat week was weaker than the broad market, which saw gains of 1.1% in the S&P and .8% in Nasdaq. Once again, biotech was constrained by its two big-cap goliaths, Amgen (NASDAQ:AMGN) and Genentech (DNA), which each slipped about 1.5% lower. Take away the market capitalization factor of the CBT 200™ index, an act that diminishes the effect of these elder statesmen, and the average biotech company rose a slightly stronger 0.6%.

Breadth swung back to the modestly positive side and was fully in line with a slightly firmer biotech sector. There were 115 biotech companies that gained ground, while 99 moved lower, which yields a close ratio of 1.2 gainers for every decliner. Reflecting a much quieter market, only 13 biotechs rose 10% or more, while 9 companies gave up at least 10% of their value. That means there were 1.4 big winners for every big loser.

The best sector in biomedical stocks was big pharma, which climbed 2.5%. For the past two years, big pharma has been hurt because it was difficult to predict growth for these companies. Now, because they have predictable earnings, they look better to investors, who have become more wary. The overall ratcheting down of expectations makes investors think more positively about a sector that is, at the same time, defensive and profitable.

There were no IPOs from biotech last week, but Tongjitang Chinese Medicines (NYSE:TCM), a Chinese company that produces traditional Chinese herbal drugs in modern form, is on the schedule for the coming week (see story). Also, last week, Jazz Pharmaceuticals (NASDAQ:JAZZ) announced its intentions to seek the fairly large sum of $173 million in an IPO later this year.

The biotechs that have made their debuts during the last year continue to outperform their more seasoned brethren. Last week, the 27 companies on the Recent IPO list rose an average 1.3%, led by a gain of 24% in SGX Pharma (SGXP). SGX reported a narrowing loss for Q4 of 2006, as it booked increased revenues from its research partnerships. On the negative side, Rosetta Genomics (NASDAQ:ROSG) dropped 22% as it gave up its post-IPO trading profits. And 3SBio (NASDAQ:SSRX) slipped 13%, which put the IPO investors at a 31% loss in the month since it began trading.

On the CBT 200™ list, La Jolla Pharma (NASDAQ:LJPC) was far and away the best performer, rising 91%. The company reported interim data from a new Phase III test of its lupus drug, Riquent. La Jolla Pharma said that biomarkers show a dose dependent positive reaction to Riquent, which is being administered at several levels including a higher dosage than given in previous trials. The biomarker, however, is not one of the endpoints of the trial. Riquent received an approvable letter from the FDA in 2004, but the agency wanted more proof of efficacy. This trial is expected to continue for most of the rest of 2007. La Jolla Pharma rose $2.81 to $5.91.

Tercica
(TRCA) rose 19% after winning a patent infringement suit against Insmed (NASDAQ:INSM). Both companies developed a growth stimulation drug (Tercica is in partnership with Genentech). Insmed agreed to withdraw its drug from the market, and Tercica-Genentech agreed to forgo a $6 million penalty payment. Tercica climbed 92 cents to $5.68.

Now that biotech has proved it does not need to decline, perhaps in the coming weeks it can also show that it can recover some of the ground lost two weeks ago.


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

Source: Biotech Week In Review: Flat Never Looked So Good