2007 Biotech Performance Review

It is time again to review past picks and to learn about my mistakes. The table below includes a list of my historical picks.

Arena Pharmaceuticals (ARNA) and Altus Pharmaceuticals (ALTU) stand out as worst performing picks. Interestingly they are both small cap picks, so this drop is not so unexpected. I am removing ALTU from my picks due to current conflicts of interest. ARNA (link to original post) has suffered because they have not announced a partner yet for its weight loss drug Lorcaserin. This is probably because the pharmaceutical industry thinks that weight loss drugs have litigation liability and are waiting for more safety data. I still believe Lorcaserin has a great chance to be successful because of its specific mechanism of action.

On the upside, Pharmasset (VRUS) has been a huge gainer. I did not expect it to do so well but their HepC trial drug is moving well in the clinic. Again, this is expected of small biotech companies.

In 2007 I stayed away from Onyx (ONXX) and Alnylam (ALNY). I missed an opportunity in ALNY which has had a good performance ($17-$30.5) while ONXX has been moving sideways ($52-$50).

I was first wrong about getting out of Celgene (CELG) at $51 based on valuations, just to watch the stock go up to $70. However, poor European sales and a tactical purchase of its partner has brought the price down to a more reasonable price of $54. I like CELG at these levels but I believe 2008 will be a disappointing year for CELG stock as Wall Street will anticipate benefits from its buy-out and the level of competition for Revlimid.

I am putting Rigel Pharmaceuticals (RIGL), Advanced Magnetics (AMAG) and Regerneron (REGN) on my watch list and I will write about them shortly.

Finally, I have been a bit stubborn while holding on to Vertex (VRTX). I still believe Telaprivir is superior to other HepC products in the clinic and will be a blockbuster. I am recommending another long position here at $22 as I believe the start of phase III trials in first half of 2008 will drive the stock price much higher. Interestingly, Vertex has recently announced they will start clinical trials for a combination therapy with an existing investigational compound from another company. I speculate this will be Pharmasset's polymerase inhibitor as their mechanisms of action may have a synergistic effect in weakening Hepatitis C virus.

Disclosure: The author has long positions in some of the stocks mentioned above.

Comments

[User 142395]

looks great

[User 142481]

If you are looking at AMAG, look at RMTI too. Like AMAG, they have a new iron therapy drug to treat anemia. Initially targeting end-stage renal disease w/ addressable market of 2M patients by 2010. They are doing another Phase II & if successful should start III in 2009. Only pure play iron play left that still cheap.