63 F
San Diego
Wednesday, Oct 4, 2023

Lagging Bio Stocks Making a Comeback

Amylin Pharmaceuticals Inc.’s chief executive said he’s been energized by the warm air streaming through the window that’s been reopened by eager biotech investors.

No wonder. Joseph C. Cook, Jr., chairman and chief executive officer of San Diego-based Amylin, saw the company stock soar some 1,568 percent within the last year.

The company’s stock surged from 68 cents in October 1998 to $7 in December ’99. In January of this year, company stock traded in the $14 range.

Granted, that’s after the company reported positive results on clinical trials of its diabetes drug Symlin last year. That marked a comeback from previous disappointing results of clinical trials with Symlin and the announcement of a 75 percent work force layoff.

- Advertisement -

Needless to say, Cook is excited. And he’s not alone.

More than 35 of the 200 stocks in the Nasdaq Biotechnology Index rose more than 40 percent in the third week of January as investors turned their attention toward stocks that still had room for dramatic growth, Bloomberg News reported.

“People are finally recognizing the value of biotech companies,” said Randall E. Woods, president and chief executive of Corvas International, Inc.

Woods also is basking in the sunshine of the biotech stock resurgence. Corvas’ stock nearly doubled within the last two months, climbing to $7.50 on Jan. 25 from $4.22 on Dec. 27, 1999.

Biotech stocks were hot, most notably in 1991, but the investment fury of recent weeks tops even that, analysts said.

There are two factors at play here, said Arthur Klausner, general partner at Domain Associates, LLC in Laguna Niguel.

For the past two years, biotech firms have been divided into the haves and have-nots with the bigger established firms, such as Amgen Inc. in Thousand Oaks and Genentech Inc. in South San Francisco, getting most of the investment funding.

Meanwhile, the smaller biotechs , many of which saw investors jump on the Internet bandwagon , were left struggling.

Since September, investors, their wallets fat from Internet investments, began to turn their attention toward other “high-tech, high-return possibilities to invest in,” Klausner said.

“People looked at the large-cap biotechs and saw such a divergence between their values and small cap , either the large cap looked expensive or the small cap looked cheap,” he said.

They discovered the “genomics” companies that are involved in deciphering the total of genes in a gene pool.

Among them are Human Genome Sciences, Inc., and Celera Genomics, both of Rockville, Md.; Affymetrix Inc. in Santa Clara; and Myriad Genetics Inc. in Salt Lake City, Klauser said.

They are in one way or another benefiting from the Human Genome Project, a publicly funded global effort to map some 100,000 human genes whose findings are posted for free on the project’s Web sites.

By finding, sequencing and patenting applications of newly discovered genes ahead of the publicly funded effort, these companies could potentially make a lot of money, some experts said. That draws investors’ interest.

“There are a lot of similarities between genomics and the Internet,” Klauser said.

“Genomics plays on data just like the Internet. It doesn’t matter if you lose money. You stake out a territory that will be valuable later on.”

Companies such as San Diego-based Aurora Biosciences Corp., which specializes in the ultra-high throughput screening of compounds that make up a potential drug against a molecular disease target, are at the beginning of the long chain of drug discovery.

Aurora’s stock also recently had a boost. The stock closed at $41.19 Jan. 25, up $29 from Dec. 13, 1999.

But James McCamant, editor of the Berkeley-based Medical Technology Stock Letter, said the small biotech stocks have long been overlooked.

“Most of the small biotech stocks were ridiculously undervalued,” McCamant said.

Among them are the San Diego-based firms, Aurora, Corvas and Quidel Corp., he said.

Added Klausner, “Stocks were trading below their true value for the last few years.”

Aurora, for instance, had several deals with major pharmaceutical companies, but saw little increase in its stock price, he said.

It’s impossible to predict how long the biotech boom will last, Klausner said. Still, he foresees that small biotech firms like Aurora and Corvas won’t settle at their previous trading range. If anything, there is room for growth, he said.

No matter what happens, the resurgence of investor interest in small biotechs is good news for the companies, he said.

“Even if the enthusiasm and momentum slows down, they’ll (biotech firms) have the cash to put the science forward,” he said.


Featured Articles


Related Articles