Four Biotech Stocks to Play the Sector Pullback

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VFC submits:

When an entire sector - or the broad market as a whole - decides to take a dip, that's when I like to go on a buying spree and as investors of the biotech/small pharma sector well know, it's been a rough few weeks. The shorts have jumped on board and taken control after the previous run-up gave many biotech stocks a liftoff earlier this year.

There's no doubt that it's tough to sit there and look at your portfolio during the pullbacks, as the stocks that you've been accumulating for the long term will lose much of the unrealized profit value - or dip into overall negative territory; sometimes pretty significantly into negative territory.

It's at times like this where the longer-term investor needs to gut it out, ignore the red (or less green) in the portfolio and add shares to those positions that have not dropped as a result of bad news, but have dropped along with a sector or market pullback.

Truth be told, we need pullbacks like this one because it gives us a chance to buy in for prices that allow the small investor to average down, reduce the overall risk a little and make it easier to bank some profits during the next run.

Additionally, the reason why we sell stocks on the way up is not only to go on vacation or eat out a whole lot more, but to make sure that there is cash on hand in the event of a pullback. Those that were all-in during the market crash over the past couple of years missed out on a big buying opportunity late last year and early this year, but those that kept some cash on the sidelines to throw at the market while everything was on sale made off pretty well.

In fact, if there is any positive to come from the most recent economic collapse, it's that a lot of small-time investors had a once in a lifetime opportunity to jump in low and build a stockpile of investments that only a few years ago would have been unheard of. Who would have thought Citi ( C ) or Ford ( F ) for a dollar; [[GE]] for about six bucks? Nordstrom ( JWN ) for under ten bucks? And on the speculative side, Sirius ( SIRI ) for five cents and a slew of biotechs for a dime or two?

The point is that it's too easy to be scared away from the market on a significant drop, and it takes fortitude to be able to buy when others are selling - as long as you're confident in your Due Diligence and confident that the stock is not dropping as a result of bad news relating specifically to that stock.

BioDelivery Sciences ( BDSI ): I simply couldn't resist adding to my position of BioDelivery Sciences shares at or around the four dollar level. With Onsolis approved and on the market (according to a PR a few weeks ago that stated the Onsolis launch was imminent), this stock should rebound nicely when real revenues start rolling in early next year. With the heavyweight marketing help of Meda behind the Onsolis launch, I think that there's a good chance that significant revenue will start rolling in quick.

BioDelivery also has potential milestone payments coming the company's way and a pipeline of possibilities utilizing the now validated BEMA technology.

I'm a very patient investor, and while I'm sitting out this pullback, I'll be adding to my position of BDSI. While I do consider BDSI a growth stock for the long term at this point, I also consider a short to mid term speculative play because I think a quick double from these levels could be in order with the right news release.

Cel-Sci ( CVM ): The saga of Cel Sci continues, but I couldn't resist adding shares at eighty seven cents on Monday as the stock continued to slide. No news has been released to justify the recent price action, yet with so much possible news pending over the short to mid term, I couldn't help but add to my position of the stock near the low of the day.

Over the years I have accumulated CVM with strictly a long term outlook, but the lower the stock slides, it becomes a decent short term play as well.

According to an article released by BioMedReports on Monday, officials at Cel Sci will release an update on the H1N1 LEAPS program "very soon", and many longs of the stock have been 'long' awaiting an update. There are impatient investors out there who want to see the company respond to the day to day action of the stock price, but I'm the type that doesn't believe it should issue news unless it's 'quality' news; meaning no fluff.

Remember, earlier this year I thought that Cel Sci was issuing some 'fluff' with the early swine flu PRs, but the one PR that indicated that the FDA had cleared the company to conduct some initial testing is the one that validated the 'LEAPS to potentially treat H1N1' platform, in my opinion.

Additional news that should be released within the next couple of months regarding Cel Sci is the validation of the Baltimore area facility and the commencement of the Multikine Phase III trial.

It's tough to predict day to day price action in a stock that is being played such as CVM, but I'm sure of one thing - the lower this one goes, the more I will buy.

My ultimate horizon for investing in CVM is for the long term - to see how Multikine plays out - but there's enough potential news that could hit the wires over the short term that the impatient investor could also be quickly satisfied.

Antigenics ( AGEN ): The recent news regarding Oncophage in Europe hit the stock pretty hard, but the long term potential of Antigenics is still alive, in my opinion.

The glioma trials look promising enough to date. I don't believe that Oncophage for the treatment of kidney cancer is DOA just yet and QS-21 is alive and well.

While I do believe that any positive news from Russia regarding the Oncophage launch in that country (combined with news of Russian government reimbursement) would be good for both the company and the stock, I consider AGEN more in the 'Phase II' portion of my portfolio - alongside Pharmacyclics ( PCYC ), Peregrine ( PPHM ) and Keryx Biopharmaceuticals ( KERX ).

I'll wait and see how low this one goes before adding more shares, but I consider Russia news a possible short term mover, QS-21 updates a mid term mover and Oncophage a long term mover.

Generex Biotechnology ( GNBT ): I continue to look at Generex as a speculative mid to long term play, based mostly on the potential of Oral-Lyn, but I'm set on shares for now unless the stock dips any further. I bought at sixty five cents and fifty five cents, so I'll probably wait and see if we see forty five cents before buying again.

I maintain my position that I think that GNBT will move up to the dollar mark as soon as either the sector starts to turn around or positive Phase III data is released (interim or actual), whichever comes first.

Disclosure: VFC is long AGEN, CVM, GNBT, BDSI.

See also Genoptix: Beats Estimates and Raises Expectations on seekingalpha.com




The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Technology , Stocks


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