Discovery Prospects Boost Biotech Firms as Hot Stock Choice
Biotechnology shares rose Thursday, pushing stock in many companies to record highs, amid optimism about prospects for breakthrough medications and expectations that more biotech companies are takeover targets.
Shares in Amgen Inc. and Genentech Inc., the world’s two biggest biotech companies, hit records and led the group higher. The Amex Biotech stock index has risen about 19% this week, and 99% this year, outperforming gains in the broader Dow Jones industrial average and technology-laden Nasdaq indexes.
Biotech stocks have rocketed this year amid hopes the group is making breakthroughs in key drug discovery efforts. Some investors who have profited by investing in Internet companies are moving money into biotech shares, looking for the next big market sector, some analysts say.
“Right now, biotech is the hottest group,” said Stephen Flaks, a hedge-fund manager whose portfolio has more than doubled this year. “Momentum players are here. There’s definitely money in biotech that hasn’t been seen in a long time.”
South San Francisco-based Genentech, which Thursday disclosed that it got approval for a new extended-release, human-growth hormone, has gained more than 60% this month amid expectations for Food and Drug Administration approval of the Nutropin Depot growth hormone drug, along with positive trial results for asthma and cancer drugs in development. Genentech shares rose $6.25, or nearly 5%, to close at $139.25 on Nasdaq on Thursday.
Thousand Oaks-based Amgen, which makes the anemia drug Epogen, gained $1.25 to $54.19, also on Nasdaq. Amgen has risen 107% year-to-date.
San Diego-based Idec Pharmaceuticals Corp., which makes Rituxan for treatment of non-Hodgkin’s lymphoma, soared $9.25 to $95.31, and is up about 50% just for the month. Immunex, a Seattle-based developer of the arthritis drug Enbrel, rose $4.13 to $99.88 and is up 40% for December.
“If you look at the whole biotech universe, it’s just exploded in the last 10 days,” said Marie Warburg, a fund manager with BB Biotech, one of this year’s best-performing biotech funds.
The last big boom in biotech stocks was in the 1990-1991 period. The sector then slumped through 1995, amid setbacks in drug development at many firms.
In 1996 and 1997 the sector gradually moved higher.
Starting about a year ago, investor interest in the stocks began to rocket. Takeovers of some biotech firms by established drug companies helped boost sentiment.
In recent days, shares in companies working to use genetic information to help develop new medicines have been among the biggest gainers.
But while biotech companies that develop drugs stand to reap huge profits if they can come up with a breakthrough medicine, it’s not clear that the benefits will be as huge for genomics companies, the bulk of which aren’t profitable, investors said.
“There are great opportunities in genomics, but they don’t have anything to do with the stock prices,” said Jim McCamant, a fund manager and editor of Medical Technology Stock Letter.
“It’s just absurd what’s going on. I can just hope to make some money by nibbling at the hysteria,” McCamant said.
Shares of Waltham, Mass.-based Genome Therapeutics Corp. have more than doubled this week after it announced that it had agreed to help drug maker American Home Products Corp. develop treatments for the bone-thinning disorder osteoporosis. The stock rose $3.69 to $17.19 on Thursday, up from a 52-week low of $2.25 on Dec. 22, 1998.
Shares of Lynx Therapeutics Inc., a Hayward, Calif.-based developer of technologies for cloning and studying DNA, soared $8 to $35.25 on Nasdaq. The stock has doubled this week.
Palo Alto-based Incyte Pharmaceuticals Inc. shares rose $4.38 to close at $51.56 on Nasdaq, up from last Friday’s close of $29.50.
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SOARING STOCKS
The Dow Jones and Nasdaq leap to record highs. A1
