The accompanying table (click to enlarge) includes 52 companies with market caps below the $150M minimum for inclusion in the ETF Innovators ((ETFI)) Emerging Bio-Pharma Index. While the performance is terrible with an average loss of nearly 50%, keep in mind that several buyouts in the out-of-favor micro-cap biotech space have been announced over the past year with 100%-plus takeover premiums, including under-the-radar names such as:

As I have written previously on Pfizer (PFE), I continue to recommend shares of the company as a turnaround play around the $15-$17 per share level, which equates to an even fatter dividend yield since I first wrote about the stock in July trading two bucks higher before the market meltdown occurred. Despite significant patent challenges to Lipitor and other products in Pfizer's portfolio over the next few years, the company's strong balance sheet, marketing muscle, and ability to bolster its pipeline through targeted acquisitions should provide investors with positive returns from what appears to be a ridiculous valuation in the low teens.

Pfizer reported 2Q08 revenues of $12.1B and adjusted EPS of $0.55, which were both ahead of consensus analyst estimates for the quarter. The company also affirmed its full-year revenue ($47B - $49B), earnings ($2.35 - $2.45 per share, adjusted), and cost-savings ($1.5B - $2B) guidance for 2008. Pfizer posted strong results in its animal health segment and brand drug sales for Lyrica, Celebrex, and Sutent.

I think the recent decline in Discovery Labs (DSCO) since the company announced a minor delay in submitting a complete response to the FDA for an approvable ruling on Surfaxin represents a buying opportunity and bought some shares on Friday at $1.74 per share.

Insider buying over the past two months, (click to enlarge chart, below), -- including a 75,000 share buy from the CEO at $1.87 -- demonstrates management's confidence in already meeting the FDA's requirements and the plan to submit a complete response to FDA for Surfaxin, which should now occur by about the third week of October. As long as DSCO submits the complete response by the end of October, a Class I review (60-day) would still allow for approval by the end of 2008.

Maybe you can teach an old dog new tricks.

Barrier Therapeutics (BTRX) has broken Wall Street hearts for most of the millennium. It's now selling at $2.50, down from an all-time high of roughly $20.

The drug is VEGF Trap-Eye that is being given to patients with neovascular or wet AMD. In the first half of the patients who will be enrolled, the drug reduced retinal thickness after 12 weeks and increased the ability of patients to read an eye chart by a mean of 5.9 letters. Regeneron rose $2.85 to $22.00.

Hollis-Eden was seeking a contract to supply Neumune as a treatment for radiation as part of the biodefense stockpile. As recently as October 2006, Hollis-Eden had been told that Neumune was in competitive range for the RFP, and Hollis-Eden was thought to be the only company still in competition for the award.

According to FTN Midwest Securities Corp. analyst Timothy Chiang:

“Barrier Therapeutics has an extensive pipeline of products for the treatment of acne and psoriasis. They have a number of antifungal products as well. I think the market has had a difficult time valuing this company largely because the company's first two products that were approved this year probably have peak sales potentials around $35 to $40 million, but it looks like the company's pathway to profitability may not occur until 2009 or 2010. So my feeling is the pipeline may create the upside potential for this company.

Adherex in-licensed the drug after the setback, but until now, GSK held options to reacquire eniluracil. For $1 million, Adherex now owns the options; the rest of the in-license agreement, including milestones and royalties, remains as it was before. Eniluracil is aimed at making 5-FU orally active, with greater efficacy and fewer side-effects.

TWST: Why the smaller names? Is that where the opportunity has been?

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