Biotech Week-in-Review: Genentech, Amgen Take a Toll on Biotech

by: Centient Biotech Investor

After starting off the year with three straight weeks of advancing prices, biotech gave back some of the gains in last week’s trading. The Centient Biotech 200™ fell 90 points to 4022, a loss of 2.2%.

That decline left the CBT 200™ with a 99 point advance for the year, good for a 2.5% gain so far in 2007.

Last week, the problem was the two biotech giants: Amgen (NASDAQ:AMGN) and Genentech (DNA). Amgen missed on its earnings, and both companies had to report negative news about their already-marketed drugs. These two giants had been a large part of the reason biotech was doing so well in 2007, and when they faltered - well, it’s the old story of the two big companies sneezed and biotech caught a cold.

For the week, Amgen was down 3.7% and Genentech was off by 2.8%. Together, that is a loss of almost $6 billion of market cap. Biotech had been outperforming the general market in 2007, and last week, they had the misfortune of outperforming the downside. However, at 2.5% so far in 2007, biotech is still showing a better return than the general market in this young year.

Because so much of the loss was concentrated in Amgen and Genentech, breadth was relatively strong for a week that produced a 2.2% loss. There were 76 biotech companies than moved higher, while 138 biotechs gave up some value, a ratio of 1.8 declining issues for every advancing one. That is not strong, but it is not devastating, either.

The balance was the other way among companies with big changes in value. There were 8 biotech companies that moved up 10% or more, while only 4 biotechs dropped a double-digit percentage, exactly 2 big winners for every big loser. The average share of a biotech company (disregarding the market cap factor of the index) shed just .85%, against the 2.2% decline in the CBT 200™ index.

The IPO market, on the other hand, keeps gaining strength. The 2006 class of IPOs added on almost 1% to their value last week, even though biotech in general headed lower. BioMimetic (NASDAQ:BMTI) led the list, climbing 15% on solid clinical news.

Oculus (OCLS) kicked off the 2007 class by pricing at $8 (see story), the low end of a reduced range, and slipping 11 cents in open market trading. In the next two weeks, Oculus will be joined by a total of three biotechs and two device company IPOs. Molecular Insight Pharma (NASDAQ:MITI), which develops molecular imaging pharmaceuticals and targeted radiotherapeutics, will offer 5 million shares in a $14-$16 range next week. Joining them will be stent-maket Xtent (XTNT-OLD), which offers a customizable drug-eluting stent. Xtent will seek to place 4.7 million shares in a $16-$18 range.

In the following week, three more companies are on the docket: Chinese biotech 3SBio [SSRX] (see story), Accuray [ARAY], which has a robotic radiosurgery system for solid tumors on the market, and anti-infectives company Optimer [OPTR].

Earnings will continue to be a factor in the coming week. Three members of the big pharma group – Merck (NYSE:MRK), Wyeth (WYE) and Lilly (NYSE:LLY) - will report. Also we will hear from two members of our Top 12 list: Allergan (NYSE:AGN) and Gilead (NASDAQ:GILD).

Last week, tiny Avalon Pharma (AVRX) was the biggest percentage gainer. The company brought in $10 million in new cash by selling 3 million shares - at a surprising 8.4% premium to the then-operative price of $3.08 per share. Sensing that Avalon must have a compelling story to tell, investors moved the stock 22% higher, pushing it up 67 cents to $3.75 (and putting the new investors in the money). Avalon remains a small-cap biotech, with a market valuation of just $38 million.

Parexel (NASDAQ:PRXL), a contract research organization, posted a 19% increase in its share price. During the week, Parexel released its Q2 earnings, showing a 21% increase in revenue and a very large 69% increase in earnings per share. Parexel, ending the week very close to a 7-year high, moved up $5.38 to $34.31. The gain made the company worth $933 million.

(NASDAQ:CGEN) climbed 15% after signing a deal with Medarex (MEDX) to develop monoclonal antibodies for oncology and autoimmune diseases. The $80 million company will contribute its discovery technology while Medarex will humanize the antibodies. Compugen traded 39 cents higher to $2.87.

Cytrix (NASDAQ:CYTR) was a 15% winner last week. Cytrix continued to move higher on news that it had leased RNAi technology from UMass, an announcement that was made in the previous week. Cytrix, a company with a market cap of $176 million, moved 32 cents higher to $2.49.

Disclosure: none.