I’m Excited About Biotech…Here’s Why
As biotech companies and investors
lick their open wounds from last year’s painful experience with the
FDA, many look forward to new life in 2003. Investing in biotechnology companies
is never boring and the upcoming year will be no exception. This year will bring
many opportunities for investors to take advantage of the volatility so inherent
in this industry’s companies.
My hope is to provide valuable information on developing
drugs in advance of this volatility that investors can digest. This
information is often crucial to understanding why a drug may experience success
or failure in front of the FDA. I also hope to periodically provide a “watch
list†of companies that are about to go under the FDA microscope. I will also
provide updates on who is presenting new drug clinical data at upcoming high
profile medical meetings. The anticipatory release of Phase III clinical data
and the FDA provide volatile opportunities for investors to take advantage of
major moves in stock prices.
Finally, I hope to provide investors with periodic
commentary on new developments in medicine and how they influence specific
companies.
What Went
Wrong in 2002?
Undoubtedly, 2002 was an ugly
year for biotechnology, leaving a bad taste in many investors’ mouths. The
major biotech indices were all down more than 30% for the year. Many companies
had high revenue hopes for several new big market drugs, only to be shot down by
the FDA. There was enough blame going around in 2002 and it started with this
government watchdog. Last year, the FDA remained without a commissioner for most
of the year, delaying the new drug application process in the minds of many. The
agency also continued to feel the public relations backlash from several
approved high-profile drugs that had to be recalled because of significant side
effects in the general population. This backlash resulted in a very cautious
approach to new drug applications, approving a five-year low number of new
drugs.
In addition, many companies shot
themselves in the foot by not submitting scientifically credible Phase III data
to the FDA in their new drug applications. The
ImClone Systems
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first to come to mind. Other companies, such as
Sepracor and
Genentech
also had
big market new drug failures sending their stock prices to new lows.
In addition to the FDA’s tight-fisted approach to approving new drugs last year, there are other reasons why
the wounds left in the biotech industry are still open. The crazed hype over
the deciphering of the human genome also contributed to the pain of last year. Yes, the potential of using genomics to generate new classes of drugs to treat
disease is real and will bear fruit some day. Unfortunately, that day was
not last year and will not be this upcoming year.
After investors realized the sector
could not live up to the hype and deliver immediately, companies crashed back to
earth. The medical impact of genomically derived drugs will not be felt for at
least another three to five years. Couple all this to the gloom hovering over
Wall Street and you had an environment that created a lot of pain for
investors.
What Will Go
Right in 2003?
I am excited about the short- and
long-term opportunities investors will have this year with many biotechnology
companies. The FDA now has a commissioner and will be able to be more efficient
in deciding on the market application of new drugs. I also believe many
companies have learned from the ImClone Systems’ painful lessons of the past and
now will take an honest look at their clinical data before presenting it to the
FDA.
In addition, there are many companies who
will present Phase III clinical data on new drugs, data
that will significantly affect their stock price. Vaxgen
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clinical data on the efficacy of its new AIDS vaccine by the end of this
quarter, data that will have a substantial impact on the company. There are
also several large-market new drugs in front of the FDA waiting to be
approved, drugs that will have a significant impact on the short- and long-term
prospects of many companies. The decisions on Icos’
(
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and Trimeris’
(
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by doctors, investors, and the market.
Overall, I believe there will be
significant opportunities for investors to take advantage of in the biotech
sector. 2003 will not be a boring year.
Paul Ruggieri MD, FACS            Â