Cancer Stocks Weekly Review: Market Laggards
by Alan J. Brochstein, CFA
AB Analytical Services
The universe of cancer stocks rose somewhat, with a few very high returns helping the average. The median return of the group now is -3% on the year thus far (it would be lower, but a few stocks fell out of the universe). The AMEX Biotech Index (BTK) is up about 3% on the year. The lists below, with data from StockVal, are comprised of domestic companies primarily with market caps in excess of $50mm, ranked by the return this past week. The total universe is 103 names, though only 93 qualify at this time. If the reader believes that there are erroneous inclusions or exclusions, feel free to let me know.
The market continued its rally this month and is now up again year-to-date. The median weekly return for the cancer stocks was 0.9%, about -1.4% below the S&P 500. The average increase, though, of 1.5% was -0.8% behind the market. Clearly, the cancer space has been lagging the bounce in the market. While it might seem immune from the developing problems that are related to housing woes and a rapidly spreading commercial credit crunch, the group, one must remember, is predominated by companies that frequently access public equity markets (debt sometimes too) for funding. In times like these, it is worthwhile remembering that capital isn’t always available. In other words, perhaps, for now, one should be focusing on companies that are profitable. For more on this subject, see the article published recently at BioHealth Investor.
STRONG
There were six double-digit gainers this week, with two of them having been in the top 15% during the prior week (Enzon and Accentia). Hana Biosciences (HNAB) received Fast Track designation for Marqibo from the FDA
for “the treatment of adult patients with Philadelphia chromosome negative acute lymphoblastic leukemia (ALL) in second relapse or who have failed two lines of prior therapy.” This resulted in an upgrade from an analyst who deemed the company more likely to survive the financial pressures after having suffered a couple of setbacks earlier. Idera (IDP), one of the better performers in the group this year, tacked on a significant addition to its gains. I was unable to find any news beyond a filing of a $50mm shelf a week ago. Post-ASCO, this developer of toll-like receptor antagonists with partnerships with Merck (MRK) and Novartis (NVS), slid from 9 to 7 and appears to be trying to take on the multi-year high of 10. Accentia Biopharma (ABPI) had jumped last week on SinuNase data but then retreated. It recovered some of that lost ground this week but remains mired in a downtrend. Fundamentally, the company has an extremely challenging balance sheet and is extremely reliant on receiving FDA approval for this chronic rhinosinusitis drug. Late in the week, the company terminated a distribution agreement with a distributor and has to deliver over 1mm shares to them (with a put as well). Arqule (ARQL) has moved to respectable performance on the year, boosted by a partnership agreement announced by competitor Exelixis (EXEL). Both companies are developing c-Met inhibitors (as is SGXP). All three of these companies are performing well year-to-date. Enzon (ENZN) pocketed $93mm by selling ¼ of its interests in Peg-Intron to Schering Plough. Not bad for a company with a market cap of under $400mm. Don’t get too excited though, as the company has $381mm in long-term debt! While this company is focused on cancer as well, its drugs on the market revolve around treating adjacent diseases. Finally, Cytokinetics (CYTK) saw a director step up and buy some stock. This company, focused on both cardio and cancer, has been mired in a downtrend since its 2004 IPO and has been flirting with the magic $5 on the downside.
WEAK
Investors continue to shun weaker balance sheets and companies with large expected losses. Synta (SNTA), which finally conducted its IPO earlier this year after a
2-year attempt (and well below its proposed range) and never saw the light of day, broke down after reporting earnings earlier this month. I guess someone figured out this week that this company is not going anywhere fast and sold the stock. I can’t really comment in a meaningful way about the likelihood of this company succeeding (they have a Phase 2 compound), but the 4 analysts sure are expecting major losses between now and then. Kosan (KOSN) had rallied last week but reversed course this week after having announced a shelf filing in the previous week. Zymogenetics (ZGEN) bolted to multi-year lows on an FDA review extension.
The two screens below attempt to focus the investor on stocks that are working. The momentum list highlights stocks beating the market over the past month and quarter but eliminates those that have had extreme moves. The rebound list highlights stocks that are oversold but showing one-month relative strength without too much one-quarter relative weakness (if at all).
SHOWING MO
Parameters: 4-week outpeformance (S&P 500) of 3% or more, 13-week outperformance of 10% or more and Price Momentum Index of <2
This list is what biotech investors live for: Look at all the 50%+ returns! Onyx (ONXX) has been the very best stock this year, aided by its Nexevar, which is on the European market and received a priority review this week from the FDA. It had pulled back from a multi-year high post-ASCO (after selling stock at $28) and is now challenging that level again. I don’t know enough about Nexevar (they are testing it for a variety of cancers beyond the approved liver treatment), but I would note that this one looks like it has a good shot at its all-time high of 60 three plus years ago (and then some). One has to wonder what Bayer would be willing to pay to control the drug. I have profiled Clevland Bio (CBLI) in this section before – looks like it is worth some attention here. I mentioned two weeks ago that Myriad (MYGN) is one that I missed and continue to have my eyes upon. For a quick review of the company, see an article I wrote earlier this year. Finally, Intuitive Surgical (ISRG) is a fantastic company that I personally sold too early. It has held up remarkably well. While I remain convinced of the long-term potential, I believe that not only does the current price reflect the opportunities but that it doesn’t offer much protection from a soft quarter should that happen.
POTENTIAL REBOUNDS
Parameters: 4-week outperformance of >5%, 13-week underperformance of <5% and Price Momentum Index of <0.
Dyax (Dyax) is showing some signs of life, though it remains well below the $7 area that has served as resistance over the past couple of years. I don’t know about their products enough to comment, but their balance sheet is quite strapped, even after their recent offering at 3.67 for $41.5mm. The rally since the July offering looks reflexive only.
Disclosure: None.
RELATED READING:
- Cancer Stocks Weekly Review: OK Week, But Several Big Losers
- Cancer Stocks Weekly Review: Very Strong Week
- Cancer Stock Weekly Review: Now Down 10% YTD
AB Analytical Services is a regular contributor to BioHealth Investor
_____________________
AB Analytical Services
The universe of cancer stocks rose somewhat, with a few very high returns helping the average. The median return of the group now is -3% on the year thus far (it would be lower, but a few stocks fell out of the universe). The AMEX Biotech Index (BTK) is up about 3% on the year. The lists below, with data from StockVal, are comprised of domestic companies primarily with market caps in excess of $50mm, ranked by the return this past week. The total universe is 103 names, though only 93 qualify at this time. If the reader believes that there are erroneous inclusions or exclusions, feel free to let me know.
The market continued its rally this month and is now up again year-to-date. The median weekly return for the cancer stocks was 0.9%, about -1.4% below the S&P 500. The average increase, though, of 1.5% was -0.8% behind the market. Clearly, the cancer space has been lagging the bounce in the market. While it might seem immune from the developing problems that are related to housing woes and a rapidly spreading commercial credit crunch, the group, one must remember, is predominated by companies that frequently access public equity markets (debt sometimes too) for funding. In times like these, it is worthwhile remembering that capital isn’t always available. In other words, perhaps, for now, one should be focusing on companies that are profitable. For more on this subject, see the article published recently at BioHealth Investor.
STRONG
There were six double-digit gainers this week, with two of them having been in the top 15% during the prior week (Enzon and Accentia). Hana Biosciences (HNAB) received Fast Track designation for Marqibo from the FDA
for “the treatment of adult patients with Philadelphia chromosome negative acute lymphoblastic leukemia (ALL) in second relapse or who have failed two lines of prior therapy.” This resulted in an upgrade from an analyst who deemed the company more likely to survive the financial pressures after having suffered a couple of setbacks earlier. Idera (IDP), one of the better performers in the group this year, tacked on a significant addition to its gains. I was unable to find any news beyond a filing of a $50mm shelf a week ago. Post-ASCO, this developer of toll-like receptor antagonists with partnerships with Merck (MRK) and Novartis (NVS), slid from 9 to 7 and appears to be trying to take on the multi-year high of 10. Accentia Biopharma (ABPI) had jumped last week on SinuNase data but then retreated. It recovered some of that lost ground this week but remains mired in a downtrend. Fundamentally, the company has an extremely challenging balance sheet and is extremely reliant on receiving FDA approval for this chronic rhinosinusitis drug. Late in the week, the company terminated a distribution agreement with a distributor and has to deliver over 1mm shares to them (with a put as well). Arqule (ARQL) has moved to respectable performance on the year, boosted by a partnership agreement announced by competitor Exelixis (EXEL). Both companies are developing c-Met inhibitors (as is SGXP). All three of these companies are performing well year-to-date. Enzon (ENZN) pocketed $93mm by selling ¼ of its interests in Peg-Intron to Schering Plough. Not bad for a company with a market cap of under $400mm. Don’t get too excited though, as the company has $381mm in long-term debt! While this company is focused on cancer as well, its drugs on the market revolve around treating adjacent diseases. Finally, Cytokinetics (CYTK) saw a director step up and buy some stock. This company, focused on both cardio and cancer, has been mired in a downtrend since its 2004 IPO and has been flirting with the magic $5 on the downside. WEAK
Investors continue to shun weaker balance sheets and companies with large expected losses. Synta (SNTA), which finally conducted its IPO earlier this year after a
2-year attempt (and well below its proposed range) and never saw the light of day, broke down after reporting earnings earlier this month. I guess someone figured out this week that this company is not going anywhere fast and sold the stock. I can’t really comment in a meaningful way about the likelihood of this company succeeding (they have a Phase 2 compound), but the 4 analysts sure are expecting major losses between now and then. Kosan (KOSN) had rallied last week but reversed course this week after having announced a shelf filing in the previous week. Zymogenetics (ZGEN) bolted to multi-year lows on an FDA review extension.The two screens below attempt to focus the investor on stocks that are working. The momentum list highlights stocks beating the market over the past month and quarter but eliminates those that have had extreme moves. The rebound list highlights stocks that are oversold but showing one-month relative strength without too much one-quarter relative weakness (if at all).
SHOWING MO
Parameters: 4-week outpeformance (S&P 500) of 3% or more, 13-week outperformance of 10% or more and Price Momentum Index of <2
This list is what biotech investors live for: Look at all the 50%+ returns! Onyx (ONXX) has been the very best stock this year, aided by its Nexevar, which is on the European market and received a priority review this week from the FDA. It had pulled back from a multi-year high post-ASCO (after selling stock at $28) and is now challenging that level again. I don’t know enough about Nexevar (they are testing it for a variety of cancers beyond the approved liver treatment), but I would note that this one looks like it has a good shot at its all-time high of 60 three plus years ago (and then some). One has to wonder what Bayer would be willing to pay to control the drug. I have profiled Clevland Bio (CBLI) in this section before – looks like it is worth some attention here. I mentioned two weeks ago that Myriad (MYGN) is one that I missed and continue to have my eyes upon. For a quick review of the company, see an article I wrote earlier this year. Finally, Intuitive Surgical (ISRG) is a fantastic company that I personally sold too early. It has held up remarkably well. While I remain convinced of the long-term potential, I believe that not only does the current price reflect the opportunities but that it doesn’t offer much protection from a soft quarter should that happen.
POTENTIAL REBOUNDS
Parameters: 4-week outperformance of >5%, 13-week underperformance of <5% and Price Momentum Index of <0.
Dyax (Dyax) is showing some signs of life, though it remains well below the $7 area that has served as resistance over the past couple of years. I don’t know about their products enough to comment, but their balance sheet is quite strapped, even after their recent offering at 3.67 for $41.5mm. The rally since the July offering looks reflexive only.
Disclosure: None.
RELATED READING:
- Cancer Stocks Weekly Review: OK Week, But Several Big Losers
- Cancer Stocks Weekly Review: Very Strong Week
- Cancer Stock Weekly Review: Now Down 10% YTD
AB Analytical Services is a regular contributor to BioHealth Investor
_____________________
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