Biotech stocks got well Tuesday--for a day, anyway--as investors started bargain hunting after the sector's big slump over the last month.
"They were down way too much," said Matthew Geller, analyst at CIBC World Markets. "The fundamentals of the group have improved over the past few months."
The Amex biotech index soared 10.2%, outpacing the Nasdaq composite's 7.2% surge. The biotech index had tumbled 49% from its March 7 record high to Monday's close.
Although at least 20 initial public offerings--including several in the biotech group--have been shelved as Nasdaq has swooned in recent weeks, Deltagen Inc. filed Tuesday to raise as much as $100 million in an IPO. The Menlo Park, Calif., company said it has developed a way to speed up gene-based drug discovery efforts.
The momentum that drove biotech stocks higher earlier this year was equally strong when they fell over the past month, with "panic selling" and margin calls--a requirement for investors who borrowed money to sell holdings or put more cash into their accounts--helping drive the sector lower, analysts said.
"In a panic all the companies are brushed with the same stroke," said Crowell Weedon analyst Doug Christopher of the sell-off, noting that established firms, such as Amgen Inc. (ticker symbol: AMGN) and Genentech Inc. (DNA) were punished along with more speculative names.
Among the biotech leaders Tuesday, Amgen gained $5 to $58.38 on Nasdaq and Genentech jumped $7.75 to $135.50 on the New York Stock Exchange.
Elsewhere in the sector:
* Cubist Pharmaceuticals Inc. (CBST) rocketed $13.63 to $30.88 after being raised to "strong buy" from "buy" by Robertson Stephens, which noted the company's expanding antibiotic pipeline and huge decline from a recent peak of $71.50 a share.
* Immunex Corp. (IMNX) rallied $4.19 to $48.06 after topping first-quarter profit forecasts.
* Some biotechs got little or no lift, however. Enzon Inc. (ENZN) eased 88 cents to $32.13 after U.S. Bancorp Piper Jaffray downgraded it to "neutral" from "buy." The company released disappointing trial results for a hepatitis C treatment, the brokerage said.
And Alza Corp. (AZA) rose 94 cents to $42.63 after beating first-quarter profit estimates and being rated "buy" in new coverage by Salomon Smith Barney.