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On
May 19th, 2003. The biotechs have been rallying the last few
weeks and we suspect investors may take a breather and take
profits in stocks that experienced big run-ups.
Take for example Genentech
(NYSE: DNA). On Monday, Genentech announced that Avastin improved
the survival of colorectal cancer patients when used in
conjunction with chemotherapy. The results of a Phase III trial
surpassed the company's target and met secondary goals related to
the rate and duration of the response to the drug. We are elated
that preliminary results for Avastin prove to be effective at
cutting off blood supply to tumors and prove the majority of
skeptics wrong. (See April 2003 issue for additional information
on Genentech.)
At this point, we see several scenarios on the valuation of Genentech’s
stock. First, we suggest our readers to protect your gains with a
stop loss at $54 since it has reached our target price of $50.
Secondly, with the upcoming ASCO (American Society of Clinical
Oncology) meeting beginning on May 31st, we see Wall
Street salivating for more details on Avastin’s Phase III
clinical data in order to forecast Avastin’s potential into
their business models. Thus, anticipation will maintain
Genentech’s share price at its current value or help the price
go a little higher.
Genentech’s excitement has spilled over to
a couple of other biotechs – Protein Design Labs (NASDAQ:
PDLI) and Regeneron (NASDAQ:
REGN). Protein Design Labs has picked up momentum in the
past few weeks over the company’s re-evaluation of its business
model. And, Regeneron picked up speed on Monday after announcing
positive new with its obesity drug, Axokine. (Please see email
update dated May 1, 2003 for Protein Design Labs and May 2003
issue on Regeneron for further details.) The fundamentals for both
these companies show they have potential to come back, and judging
by their trading volume, investor’s are interested in their
story. The share prices of both companies appear to have bottomed
and any pullbacks on their current levels would represent an
opportunity.
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