Seven Stocks To Watch

The Old
and the New

Leave it to
the FDA to stimulate investor interest in the biotech industry and last week
was no exception.(
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and BioMarin

(
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by blessing their new drug applications for two potentially fatal
inherited diseases. Genzyme was
actually blessed twice because it is cosponsoring BioMarin’s new drug in
addition to having its own. Both
company’s stock prices had a nice response to the positive recommendations
while the competitor, Transkaryotic Therapies
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took it hard
on the chin. Its competing drug
did not get a vote of approval and the stock price took a beating because of
it. However, because the
committee’s no-confidence vote is not the final word, Transkaryotic’s drug
is not dead yet. Unfortunately, it
is on life support and the future does not look good.
The next step for all three companies is to now go in front of the full
FDA within the next several months for final approval in order to proceed with
actual marketing and production. Often,
companies will give back some of their short-term gains over the months
preceding a final FDA decision.

Obviously
any impending FDA decision on a new drug has serious repercussions on the stock
price of the company facing the decision. This
is especially evident when a smaller company, such as BioMarin, comes in front
of an FDA committee. Interestingly
enough, the moves made by these companies occur months in advance of an FDA
decision meeting. If you looked at
the stock price movement of both Genzyme General and BioMarin from August to
mid-December 2002, both companies mirrored one another in their positive
momentum. The positive gains were
just a reflection of the positive data in the medical literature supporting the
new drug applications. Going into
the January 13, 2003 meeting, both companies gave up some of the previous
months’ gains in anticipation of a decision.
This pattern is often a typical pattern of stock movement leading up to a
favorable FDA decision. The key is
identifying companies months in advance of a meeting, understanding the studies
made public, and coming to a conclusion about the data.In
addition to Genzyme General and BioMarin, Genentech
(
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also had a nice
week. The company released its
fourth quarter earnings on Friday and net profits more than doubled.
This was a nice surprise for investors and the company’s stock price
jumped on Friday. The increase in
profits was mainly due to increased sales of
Rituxan,
to treat Non-Hodgkin’s Lymphoma (NHL) and
Herceptin
to treat metastatic breast cancer. Rituxan
sales increased 41% while Herceptin’s sales increased 4%. Rituxan is the
workhorse here and will have broader appeal to doctors as its use expands to
other diseases. Herceptin’s
growth is limited because the majority of breast cancer patients are not
candidates for the drug.

The
next six months are going to be very nerve racking for Genentech executives as
the await the release of several key decisions and medical data.
The first key decision does not involve Genentech directly.
Biogen (BGEN) anxiously awaits the full FDA’s decision on its new drug
(Amevive)
to treat Psoriasis. This decision
is expected by the end of the first quarter and will have important implications
on both Biogen’s and Genentech’s growth potential.
The public medical data on the drug does support its effectiveness in
treating this common disease and the FDA’s Advisory Committee gave it a vote
(8-2) of confidence back in May 2002. Biogen
could definitely use the good news. Unfortunately
for Genentech, it too is expecting the FDA to decide on its own new drug to
treat asthma
(Xolair).
However, this decision will not come until midyear and Biogen may get a
head start if its drug is approved first. Genentech
also has a new drug
(Raptiva)
developed to treat Psoriasis, awaiting an FDA decision later in the year.
Like asthma, psoriasis affects millions of people and both are huge
markets for growth. As these
decisions approach, keep an eye on Amgen because it recently released positive
phase three clinical data on its drug Enbrel to treat psoriasis.
The drug is already approved for the treatment of rheumatoid arthritis
and may be a player in the large psoriasis market.

One
final decision for Genentech executives to ponder is the release of phase three
clinical data on two new promising, yet controversial, cancer treatments.
The drugs Avastin to treat metastatic colon cancer and Tarceva to treat
lung cancer are two new treatment approaches that may have resonating
implications in treating cancer patients. I
expect Genentech to release study data on both drugs by mid-year.
The medical and investor community anxiously awaits these data.
There will be more on this in my next article.

Biotechnology
Update:
Companies
in the Spotlight


1)
Regeneron

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:
expects to release late stage clinical data by the end of the first
quarter on new drug
Axokine
to obesity. Obesity is a huge
market for an important drug and positive data will greatly impact on the stock
price.

2)
Spectranetics

(
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:
expects to release pivotal clinical data on new laser technology to treat
artherosclerotic limb disease at a symposium in Miami Beach, Florida on January
21, 2003.

3)
Biogen

(
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:
expects full FDA decision on new drug
(Amevive)
to treat Psoriasis by the end of the quarter.



.Paul Ruggieri, M.D.