Biotech Stocks Lure Back the Adventurous
Biotechnology stocks have surged back to life in the last two weeks, suggesting that the stock market is luring risk-takers back into action.
Buoyed in part by a spate of good news from key companies, the Amex biotech index has jumped 25% in the last four days. Since hitting its low on May 23, the index has rallied 34%.
That tops the gains posted by most other tech-stock sectors in the rebound since May 23. The red-hot Philadelphia semiconductor stock index, for example, is up 28%. The Amex index of major computer networking stocks is up 20%, and the Nasdaq composite is up 19%.
Biotech stocks went on a rip-roaring surge from late December to early March that helped drive the Nasdaq index to fantastic heights. Then, biotech’s meltdown in early March foreshadowed by about a week the start of Nasdaq’s sharp descent.
The Amex biotech index remains about 26% off its March peak, and few people on Wall Street expect it to reach that level soon.
Still, many analysts are impressed with the power behind the sector’s gains--which continued Tuesday, even as Nasdaq overall lost ground.
The rally has been fed in part by anticipation that Celera Genomics Group (ticker symbol: CRA) is set to announce that it has finished mapping the human genome.
New-product announcements from several companies, including Genentech (DNA) and Immunex (IMNX), also have boosted the sector in recent days.
Once again, investors are buzzing at the prospect of medical breakthroughs translating to profits for a host of biotech upstarts and established companies. However, many firms still have neither earnings nor much in revenue, and many experts agreed that the wild gains in many of the stocks early this year--especially genome-related issues--were overdone.
Celera still is down 62% from its record high of $276.
Nevertheless, the latest biotech rally appears to indicate an important shift in investor sentiment.
Amid the tech-stock plunge of the last three months, shares frequently sold off even in the face of good corporate news.
Now, the positive response to biotech companies’ announcements of recent days suggests investors are again willing to jump into high-risk issues with exciting prospects.
“The fact that people are willing to go back to these stocks . . . is an important occurrence,” said John Hughes, a technical analyst at Shields & Co., a New York investment firm.
The hope on Wall Street is that the biotech rally will spread to other market sectors, paving the way for solid gains this summer.
“We need more groups to do exactly” what biotech has done, said Gregory Nie, a technical analyst at First Union Securities.
“Broad-based participation is an essential ingredient for a summer rally.”
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Leading the Pack, Again
Biotech shares have been among the hottest stocks in the market rebound since the Nasdaq composite index bottomed on May 23. Here’s a look at how key stocks have fared since then.
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Change Tues. Tues. 52-wk. since Stock (ticker) close change high May 23 Millennium (MLNM) $119.50 +$13.19 $158.00 +81% Celera Genomics (CRA) 105.25 +8.25 276.00 +80% Human Genome (HGSI) 122.00 +8.50 232.75 +71% Incyte Pharm. (INCY) 76.94 +5.81 289.06 +54% Isis Pharm. (ISIP) 13.25 +2.31 39.00 +47% Genentech (DNA) 131.00 +0.94 245.00 +36% Cephalon (CEPH) 60.88 +1.13 74.38 +29% Protein Design (PDLI) 137.88 +4.38 338.00 +26% Amgen (AMGN) 67.50 +0.44 76.50 +21% Gilead Sciences (GILD) 62.13 +2.13 95.50 +3% *Amex biotech index 584.74 +22.57 794.53 +34% Nasdaq composite 3,756.37 --65.39 5,048.62 +19%
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Source: Bloomberg News, Reuters
