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The Cancer Conference Trade: Picking Up Biotech Bargains

Posted
7/21/2011 5:23:00 PM
By: Kapitall
Referenced Stocks:AGEN;BIIB;CYCC;EXEL;INCY;NEOP;NKTR;OGXI;TEVA;VRTX

(List compiled by Alexander Crawford)

Biotech stocks as a whole tend to underperform after the annual American Society of Clinical Oncology (ASCO) conference in June. Many investors buy biotech up to the conference, which has many releases of clinical data, and then some investors lose part of their excitement.

But one month later (i.e. around now), there may be opportunities for gains.

Marc Lichtenfeld of The Oxford Club Communique crunched some numbers and found that over the last 10 years, the biotech sector fell 1.84% in the month following the ASCO Conference, but three months out the industry had risen 4.95%. Over six months following the conference, the industry was up 8.1% on average.

For a diversified approach to investing in the biotech sector, Lichtenfeld suggests the iShares Nasdaq Biotechnology ETF (IBB) for its liquidity. But he also warns that it is a bit “top heavy,” with the top 10 holdings making up 46% of the portfolio. His three favorite names in the ETF are Teva Pharmaceutical (TEVA), Vertex Pharmaceuticals (VRTX) and Biogen Idec (BIIB). 

According to a report from Motley Fool, “the hard crash after ASCO often results from investors selling the news, rather than any data that lowers a drug's approvability or sales potential.” In the report they list the price changes on June 6 (during this year’s ASCO Conference) for companies that had presented data. Below we present up-to-date data on these companies’ performance, as well as the companies favored by Lichtenfeld.

Do you think these names are possible bargains? Use this list as a starting-off point for your own analysis. 

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1. Teva Pharmaceutical Industries Limited (TEVA): Drug Manufacturers Industry. Market cap of $44.51B. Performance over the last month at 1.02%. The stock has lost 10.85% over the last year.

2. Vertex Pharmaceuticals Incorporated (VRTX): Drug Manufacturers Industry. Market cap of $10.34B. Performance over the last month at 11.16%. The stock has had a good month, gaining 11.16%.

3. Biogen Idec Inc. (BIIB): Biotechnology Industry. Market cap of $25.22B. Performance over the last month at 5.85%. The stock has gained 89.87% over the last year.

4. Agenus Inc. (AGEN): Biotechnology Industry. Market cap of $86.74M. Performance over the last month at -2.53%. The stock has gained 1.32% over the last year.

5. Cyclacel Pharmaceuticals, Inc. (CYCC): Biotechnology Industry. Market cap of $52.61M. Performance over the last month at -10.32%. The stock is currently stuck in a downtrend, trading 10% below its SMA20, 18.56% below its SMA50, and 23.16% below its SMA200. It's been a rough couple of days for the stock, losing 9.6% over the last week.

6. Exelixis, Inc. (EXEL): Biotechnology Industry. Market cap of $1.09B. Performance over the last month at -6.56%. The stock is a short squeeze candidate, with a short float at 10.09% (equivalent to 8.14 days of average volume). The stock has gained 178.5% over the last year.

7. Incyte Corporation (INCY): Biotechnology Industry. Market cap of $2.42B. Performance over the last month at 6.47%. This is a risky stock that is significantly more volatile than the overall market (beta = 2.39). The stock is a short squeeze candidate, with a short float at 11.82% (equivalent to 8.54 days of average volume). The stock has gained 61.78% over the last year.

8. Neoprobe Corp. (NEOP): Medical Appliances & Equipment Industry. Market cap of $293.07M. Performance over the last month at -2.65%. The stock is a short squeeze candidate, with a short float at 14.37% (equivalent to 8.03 days of average volume). The stock has gained 74.6% over the last year.

9. Nektar Therapeutics (NKTR): Biotechnology Industry. Market cap of $846.47M. Performance over the last month at -3.01%. The stock is a short squeeze candidate, with a short float at 10.01% (equivalent to 10.83 days of average volume). The stock has lost 38.17% over the last year.

10. OncoGenex Pharmaceuticals, Inc. (OGXI): Diagnostic Substances Industry. Market cap of $154.65M. Performance over the last month at -7.34%. This is a risky stock that is significantly more volatile than the overall market (beta = 2.11). The stock is a short squeeze candidate, with a short float at 5.07% (equivalent to 7.52 days of average volume). The stock has gained 32.03% over the last year.