Tuesday’s Top Biotech & Medical Stocks
by H.S. Ayoub
BioHealth Investor
Biotechnology
GPC BIOTECH AG [GPCB] +11.52%
LPATH INC [LPTN.OB] +9.09%
NOVAVAX INC [NVAX] +8.39%
GTX, INC. [GTXI] +7.86%
METABASIS THERAPEUTI [MBRX] +7.40%
Diagnostic Substances
GENELABS TECH INC [GNLB] +7.43%
ISTA PHARMACTLS [ISTA] +5.92%
PONIARD PHARMA [PARD] +3.20%
INTERLEUKIN GENETICS [ILI] +2.99%
RESPONSE GENETICS, I [RGDX] +2.93%
Drug Delivery
ELAN CP PLC ADR [ELN] +3.88%
COLUMBIA LABS INC [CBRX] +2.92%
GENEREX BIOTECH CORP [GNBT] +1.91%
MATRIXX INITIATVS [MTXX] +1.51%
QUIGLEY CORP THE [QGLY] +1.40%
Drug Manufacturers
TAPESTRY PHARMA INC [TPPH] +12.20%
PROTALEX INC [PRTX.OB] +10.71%
DEPOMED INC [DEPO] +5.05%
CELL THERAPEUTICS [CTIC] +4.12%
NEUROCHEM INC [NRMX] +4.11%
Drug Related Products
QUEST GROUP INTL [QSTG.OB] +42.86%
AUXILIUM PHARMACEUT [AUXL] +8.44%
TIENS BIOTECH GR USA [TBV] +6.56%
NATROL INC [NTOL] +4.97%
ARGAN INC [AGAX.OB] +2.60%
Generic Drugs
HELICOS BIOSCIENCES [HLCS] +6.12%
LOTUS PHARMACEUTICAL [LTUS.OB] +3.70%
HI-TECH PHARMACAL [HITK] +1.08%
ISOLAGEN INC [ILE] +1.05%
PHARMACUTICAL CO [PRX] +0.38%
Medical Appliances & Equipment
REGENERATION TECH [RTIX] +8.61%
QMED INC [QMED] +6.91%
INVACARE CORP [IVC] +6.42%
BSD MEDICAL CORP [BSM] +6.00%
THERAGENICS CORP [TGX] +4.50%
Medical Instruments & Supplies
VYTERIS INC [VYHN.OB] +27.43%
NEUROMETRIX, INC. [NURO] +9.37%
MILESTONE SCIENTIFIC [MLSS.OB] +6.67%
OPHTHALMIC IMAGING SYS INC [OISI.OB] +5.88%
LEMAITRE VASCULAR [LMAT] +4.89%
Medical Laboratories & Research
MEDTOX SCIENTFIC INC [MTOX] +9.56%
OSI PHARMACEUTIC [OSIP] +3.60%
RADNET INC [RDNT] +2.43%
GENOMIC HEALTH, INC. [GHDX] +2.10%
ERESEARCHTECHNOLOG [ERES] +0.84%
- Monday’s Top Biotech & Medical Stocks
- Friday’s Top Biotech & Medical Stocks
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HemCon Dental Dressing Receives CE Mark
by Sara Calabro
Med Tech Sentinel
HemCon Medical Technologies, of Portland, OR, has received clearance to sell its Dental Dressing in Europe, satisfying the international demand that’s been present since the product became available last year in the U.S. Armed with the CE Mark, the company will begin distributing dressings in the U.K., Germany and other EU countries.
The HemCon Dental Dressing is designed to be used by oral surgeons and dentists following tooth extractions and other oral procedures; it has also been used successfully to treat oral trauma. This dressing uses the same materials and technology as HemCon’s bandages, which are used by the military to control severe bleeding on the battlefield. Earlier this month, HemCon signed a deal with Cardinal Health to expand the use of its bandages into hospitals and surgery centers.
The Dental Dressing measures 10mm x 12mm and, when placed in an extraction socket, adheres to the surrounding tissue, protecting it and relieving pain; it dissolves within seven days.
RELATED READING:
- Do Anxious Dental Patients Really Need Oral Sedation?
- Align Technology Blows Through Estimates
- Investing In the Growing Dental Industry
- Why Does Procter & Gamble Need a Dental Laser?
- Oragenics Betting on Dental Cavity Vaccine
Med Tech Sentinel is a regular contributor to BioHealth Investor
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Monday’s Top Biotech & Medical Stocks
by H.S. Ayoub
BioHealth Investor
Biotechnology
GPC BIOTECH AG [GPCB] +20.77%
ENTREMED INC [ENMD] +10.24%
JAZZ PHARMA INC [JAZZ] +7.94%
LEV PHARMACEUTICALS [LEVP.OB] +7.64%
VIA PHARMACEUTICALS [VIAP] +5.96%
Diagnostic Substances
AVALON PHARMACEUTIC [AVRX] +4.58%
MONOGRAM BIOSCIENCES [MGRM] +3.66%
GENELABS TECH INC [GNLB] +3.06%
HEALTHCARE TECH LTD [HCTL] +2.97%
ABAXIS INC [ABAX] +2.62%
Drug Delivery
AVALON PHARMACEUTIC [AVRX] +4.58%
MONOGRAM BIOSCIENCES [MGRM] +3.66%
GENELABS TECH INC [GNLB] +3.06%
HEALTHCARE TECH LTD [HCTL] +2.97%
ABAXIS INC [ABAX] +2.62%
Drug Manufacturers
JAVELIN PHARMACEUTIC [JAV] +5.34%
BAYER AKTIENGES ADS [BAY] +4.95%
SCICLONE PHARMA [SCLN] +3.24%
ALLERGAN INC [AGN] +2.70%
PRANA BIO LTD ADS S1 [PRAN] +2.50%
Drug Related Products
XELR8 HOLDINGS, INC [BZI] +9.24%
AUXILIUM PHARMACEUT [AUXL] +3.34%
NUTRACEUTICAL INTL [NUTR] +2.20%
SALIX PHARM DEL [SLXP] +2.01%
LABOPHARM INC. [DDSS] +1.78%
Generic Drugs
CATALYST PHARMACEUTI [CPRX] +5.21%
HI-TECH PHARMACAL [HITK] +3.47%
CARACO PHARMA LABS [CPD] +2.37%
MYLAN LABS INC [MYL] +2.34%
HELICOS BIOSCIENCES [HLCS] +2.04%
Medical Appliances & Equipment
DYNATRONICS CP [DYNT] +12.58%
MEDICAL SOLUTION MGT [MSMT.OB] +12.50%
MINE SAFETY APPL [MSA] +10.28%
ARRHYTHMIA RES TECH [HRT] +8.15%
PATIENT SAFETY TECH [PSTX.OB] +7.14%
Medical Instruments & Supplies
BIOTEL INC [BTEL.OB] +15.07%
ROCHESTER MEDICAL [ROCM] +8.66%
BIOLASE TECH INCS3 [BLTI] +7.49%
ANGIODYNAMICS INC [ANGO] +6.93%
COVIDIEN LTD [COV] +5.85%
Medical Laboratories & Research
RADNET INC [RDNT] +7.59%
HEALTHCARE PROVIDERS [HPRD.OB] +7.53%
ENZO BIOCHEM INC [ENZ] +3.78% M
GENOMIC HEALTH, INC. [GHDX] +2.52%
PSYCHEMEDICS NEW [PMD] +1.19%
- Friday’s Top Biotech & Medical Stocks
- Thursday’s Top Biotech & Medical Stocks
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Cal Ripken: A Biotech Role Model
by Michael Shulman
BiotechBlitz
Forgive the lack of posts last week, but I’ve been on the road. It was less my speaking engagements at the San Francisco Money Show than vacation time with one of my twin 15-year-old sons — my baseball player son. (His brother is a lacrosse player.)
We walked the wharf, ate some of the best dim sum in the U.S. (at a restaurant called Yink Seng), discovered two tea-tasting stores in traditional Chinatown, had great sushi and watched the syringe man, Barry Bonds, hit a home run to the raucous cheers of the home-town delusional — my son’s highly visible Stanford baseball hat even made the ESPN highlights.
And we both think Barry Bonds is a disgusting mockery of baseball.
And then there’s Cal Ripken, who is a world apart, and did it the right way.
Before the Nats came to D.C., we made many visits to the Orioles’ Camden Yards and were in the stands when Ripken hit his 400th homer. If not for 9/11 and the re-scheduling of games, we would have been in the stands for his last game.
The only baseball I ever caught in the stands was a Ripken foul ball — which he signed (since there is possibly no more fan-friendly player) — and my sons attended his camp — with mom and dad paying more than double the regular rate for the the week Cal was actually at the camp the boys got to hit batting practice off of the Hall of Famer. My left hitting son said he could to pitch to lefties.
And yes, there is relevance between Cal and biotechs, as he is a role model for how to manage a biotech company and how to invest in one.
Ripken came to work every day. He’s the iron man who shattered a record no one thought could be broken — 2,632 consecutive games. He was never a lunch pail player — he was an all star, has a World Series ring and so on — but work was what it is all about. Not flash, not a super homerun season, not a special chair in the clubhouse, not grand juries and mistresses, just work — excellent work, sometimes great work, often clutch work, but work.
And that is what you need to look for in biotech companies.
* Not companies living on press releases.
* Not companies rushing to get an FDA approval with a flawed trial design and middling trial results.
* Not companies looking to become billion-dollar outfits overnight and refusing to hook up with larger marketing partners.
* Not companies paying their executives excessive salaries and bonuses even though they are years away from revenues.
* Not a GPC Biotech (GPCB) asking for a drug approval using a trial with primary endpoints never before seen by the FDA.
* Not a Dendreon (DNDN), reacting to a failure with Provenge by rushing to get a new application in that may not only fail but may forever kill the drug.
Look for the Ripken companies — more like BioCryst (BCRX) bringing in a CEO with operations experience, and having lined up marketing partners and Uncle Sam to take it through its next stage of development as a company.
Successful biotech investors will look for the steady and reliable leadership doing the work that it takes to make a company successful. It is work, and even if we strive for the 10-to-1 or the 100-to-1 payoff, it’s not done by rolling the dice on rumors, incomplete information and guesswork. It is about building a portfolio, accepting risk and volatility, riding it out if you believe in the company, and avoiding the temptation to trade.
Forgive the piety and pedantic tone, I really believe this.
And let me tell you why this works and use my sons as an example. My baseball son played rec league ball for eight years, never summer ball, never All Star ball, always worked very hard, took practice seriously, made himself a catcher and a very fine hitter.
He began ninth grade at a very serious sports high school, went to the winter workouts, the team was thin because of seven graduating seniors, and after returning from spring training in Florida (yeah, really — this is high school!), was the starting varsity catcher. 88 mile an hour fastballs, soon to be Division I pitchers, nasty curve balls, serious baseball.
Why? To quote his coach, he was a coach’s kid, took everything seriously, worked hard every inning to improve his game. My lacrosse son is a goalie and had never played before eighth grade. He played middle-school lacrosse as if he were born to do it, went to high school, rode the bench due to a lack of intensity at practice and a queue of players in front of him.
He did not sell off – he joined a weekend league, playing up to four games each Sunday, has been in and out of lacrosse clinics from Johns Hopkins to lessons with the Notre Dame goalie and is totally re-dedicated to hard work this fall.
Yeah, I’m proud of them both, but not for their achievements so much as their work ethic and dedication. It’s the Ripken way. And as investors, we should all do the same. Hard work pays.
BiotechBlitz is a regular contributor to BioHealth Investor
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Breast-Cancer Detection Firm Seeks Series C Funding
by Sara Calabro
Med Tech Sentinel
Infrared Sciences, a Stony Brook, NY-based company focused on early breast-cancer detection, is seeking $5 million in fourth-round financing, to further advance its Sentinel BreastScan technology.
Unlike mammography, ultrasound or MRI, which detect anatomical features such as a mass, the Sentinel BreastScan uses infrared technology to identify physiological features of the breast tissue — areas of blood perfusion and angiogenesis, when abnormal cells begin forming their own blood supply, as well as temperature signs — that are often present at the earliest stages of cancer. Studies have shown that angiogenesis can start 10-12 years before a cancerous lesion is large enough to be detected by conventional technologies.
A Sentinel BreastScan procedure takes about 10 minutes and does not involve any compression or touching of the breast. The patient sits in a chair disrobed from the waist up, with her arms on the armrests. In front of the patient is the Sentinel system, which includes an infrared camera, a cool air source, a video display so the patient can see her own infrared image in real time, and the operator’s station. Once the exam begins, the patient’s thermal images will be recorded for analysis. A few seconds later, the cool air source comes on for approximately 3-4 minutes. At this point, the system’s software analyzes the recorded images for possible abnormalities. This part takes about 4-5 minutes, after which a report is generated.
Another advantage of the Sentinel system over traditional screening tools is that it involves no radiation, making it a viable option for women of all ages — typically, women do not start getting mammograms until age 40, to avoid exposure to radiation. The Sentinel also has proven effective in the 30-40% of women with dense breast tissue, for whom mammography is suboptimal. It does not respond to benign conditions, such as a cyst or fibro adenoma, which helps physicians more accurately determine next steps for suspicious legions.
The Sentinel BreastScan was cleared by FDA in 2004 and in Europe in 2006. It costs $50,000, but Infrared Sciences is currently offering it for free, as a method of introducing the technology quickly. The company is targeting primary care docs, OB/GYNs, breast surgeons and comprehensive breast centers.
Infrared Sciences started generated revenues in 2006, and CEO Tom DiCicco says, “Profitability is within sight.”
Med Tech Sentinel is a regular contributor to BioHealth Investor
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Returning a Product to Market After it is Tossed
by Mark S. Senak
Eye On FDA
The FDA announced on Friday that the drug Zelnorm, manufactured by Novartis (NVS), would be returning to market for the treatment of women with irritable bowel syndrome (IBS) for certain patients only.
“These patients must meet strict criteria and have no known or pre-existing heart problems and be in critical need of this drug,” said Steven Galson, M.D., M.P.H., director of FDA’s Center for Drug Evaluation and Research (CDER). “Zelnorm will remain off the market for general use.”
You may recall that there are two patient types for IBS - one whose suffering is characterized by diarrhea and one by constipation. Coincidentally, at nearly the same time, there were two medications devised to treat IBS - Lotronex, manufactured by GlaxoSmithKline (GSK) and Zelnorm.
Lotronex experienced some safety-related issues once it was approved and was subsequently pulled from the market. However, it returned to the market under a patient safety risk management program.
Much later, Zelnorm also was perceived to have a safety related issue - this one heart attack related and on March 30, the FDA asked that it be pulled from the market. However, as of Friday, it returns, albeit to a more limited population of patients laid out by terms and conditions specified by FDA.
Zelnorm and Lotronex returned to market under different circumstances - the former under a treatment IND and the latter under a risk management program.
What does it take to return a product to market? This may not be a complete list, nor or all of these necessary, but here are characteristics that help make the case.
Fill Unique Role - It doubtless helped both of these drugs considerably that the conditions they treat do not have other drugs that fulfill this role. In other words, suffering patients were without choice.
Provision of Clear Benefit - Here both drugs provided a clear benefit to patients that needed to be re-evaluated against newly discovered risks or perceived risks.
Vocal Patient Population - The Lotronex patients, in particular, were very vocal and formed a pretty solid group going into the FDA hearing on the risk management plan necessary to re-introduce Lotronex. There was some very moving and effective patient testimony given during that meeting that put a human face on a condition many might otherwise be inclined to minimize.
Companies Willing to Compromise - A company may not agree with the risk assessment, but it also may be tempting for a company to take the matter so seriously and personally, that they are unwilling to compromise. Here, in both instances, the companies were willing to accept limitations to their marketing of drugs in order to get patients what they needed. These were both mature and FDA-experienced companies, whereas a small start-up or single product company might not be so pliant.
Novartis is providing further information on Zelnorm at its site.
Eye On FDA is a regular contributor to BioHealth Investor/
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GPC Biotech: Dead Money!
by Andrew Vaino
Vaino’s Biotech Corner
GPC Biotech (GPCB) took a big hit (the stock closed at $20.36 on July 24 and opened at $13.35 on July 25) on July 25 when an FDA advisory panel voted unanimously to wait until a complete Phase 3 study of their drug Satraplatin is available. GPCB had been trading at over $32 on July 19. Often this type of price decline can be a good buying opportunity. Or not.
Satraplatin looks like a promising cancer drug. It’s related to cisplatin, a platinum containing drug that cross-links DNA. A big advantage of Satraplatin is that it’s taken orally, not an injection.
One important detail about Satraplatin: it was initially being developed by Bristol-Myers, but they stopped a clinical trial after only 50 patients were treated due to “…low commercial priority for this drug by BMS at the time.” This is a valid explanation. A large company like Bristol-Myers just can’t make a big profit from a smaller drug such as Satraplatin. Sensing opportunity, Spectrum Pharmaceuticals (SPPI) licensed the drug, and subsequently re-licensed it to GPCB.
Resistance to platinum drugs is becoming a problem. In a study published in Biochem. Pharmacol. (2007, 74, 20–27) in vitro resistance to cells engineered to be resistant to platinum crosslinkers was nearly 5 times less for Satraplatin than for either cisplatin or oxaliplatin. As both incidence of prostate cancer and resistance to Pt agents are rising, this bodes well for future sales.
The drug actually looks promising. Results of a 950 patient Phase 3 study published in Lancet Oncology (2007, 8, 290) as a second line treatment for hormone refractory prostate cancer (HRPC) were good. Six months after treatment, 30% of the Satraplatin cohort and 17% of the placebo group had not progressed: after one year these figures were 16% and 7%, respectively. Regardless, the FDA still wants to see a more complete dataset.
So, a company selling at steep discount with what looks to be a viable drug could be a bargain. Or it could still be overpriced. The FDA’s decision pushes approval of Satraplatin back to late 2008 in a best case scenario. According to GPC’s SEC filings, the primary patents covering Satraplatin expire in 2008 and 2010 in the United States, and in 2009 in most other countries. This leaves a very limited time frame in which to sell the drug before generic competition forces the price down. The chemistry of making Satraplatin is straightforward, so generic competition is pretty much assured.
Now, GPC can seek an extension of up to 5 years of patent coverage, but whether they obtain this or not is uncertain. Further, it remains uncertain even if the FDA will approve the drug after the final data is submitted. Also, it’s unclear how robust sales will be. While I do believe an orally available cross-linker will be of benefit, this won’t necessarily translate into sales. The company does have an antibody in a Phase 1 study, but that’s years from any payoff.
The company has enough money to see them through the next couple of years. My take is even at this steep discount this stock is dead money.
RELATED READING:
- Spectrum Pharmaceuticals and Satraplatin
Vaino’s Biotech Corner is a regular contributor to BioHealth Investor
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Cancer Stocks Weekly Review: Falling with the Market
by Alan J. Brochstein, CFA
AB Analytical Services
The post-ASCO hammering, which has been almost unabated, continued this week, with the median return of the group now -8% on the year thus far. The AMEX Biotech Index (BTK) is still up about 2%. 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. If the reader believes that there are erroneous inclusions or exclusions, feel free to let me know.
In an absolutely horrible week for the market overall, the median decline of -4.4% was actually about 0.4% stronger than the S&P 500. The average decline of -4.9% was in line with the overall decline. 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
STRONG
Trubion (TRBN) was the only double-digit gainer on the week. Oddly, there 
didn’t appear to be any news. TRBN conducted its IPO late last year at $13 and is now up from its $18 close at year-end. The company’s lead product is not cancer-related (rheumatoid arthritis), though its second product under development does address NHL and CLL. Tomotherapy (TTPY), while not a double-digit gainer, was certainly well ahead of the market. This recent IPO offers a specialized radiation treatment machine (over 125 installations) and continues to gain clients for its Hi-Art system. My understanding is that the Hi-Art has certain applications but can’t be used as broadly as an IMRT or IGRT machine. Finally, Onyx (ONXX) had a decent week, relatively speaking. This stock rocketed in February when Bayer announced positive news on Nexavar (treats liver cancer) and has been consolidating recently. Nexevar was submitted to the FDA in late June. ONXX sold 6mm shares at 28 in June, so clearing that level would be nice.
WEAK
Spectrum Pharma (SPPI) continued its plunge subsequent to the FDA questioning one of its lead drugs, prostate cancer pill Orplatna. The stock had done well following 
its May equity sale at $6.25 that raised $30mm. While the news was disappointing, the company’s pipeline appears diverse and their finances in great shape. My comment last week about support at $5 was clearly not helpful, but I will offer that the $4 area has the potential to hold as well. Immunomedics (IMMU), which has been selling off since April, fell despite no apparent catalyst. There appears to be some support between 2.50 and 3.00. Immunogen (IMGN) lost a senior executive this past week, but, more importantly, has an open shelf filed recently for $75mm. This one looks like $4 is coming
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
(Note that CYTC and DIGE are in the process of being acquired)
Myriad (MYGN) is one that I wrote about earlier this year. I hope it drops to the 35 area, where it looks like a good entry
POTENTIAL REBOUNDS
Parameters: 4-week outperformance of >5%, 13-week underperformance of <5% and Price Momentum Index of <0.
For the record, I am not a fan of Radiation Therapy Services (RTSX), which is subject to both reimbursement risk as well as competitive threats. Celgene (CELG) bounced on the heels of a strong earnings report. With that said, though, I would be very cautious on the name, as I expect that it could get dragged down in the market sell-off.
Disclosure: None, though I am seriously considering buying ACEL after they do a financing
RELATED READING:
- Cancer Stocks Weekly Review: Now Down for 2007
- Cancer Stocks Weekly Review: Lagging Again!
- Cancer Stocks Weekly Review: Tracking the Market
AB Analytical Services is a regular contributor to BioHealth Investor
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Friday’s Top Biotech & Medical Stocks
by H.S. Ayoub
BioHealth Investor
Biotechnology
HEMOBIOTECH INC [HMBT.OB] +27.50%
TARGACEPT, INC. [TRGT] +19.89%
REXAHN PHARMACEUTICL [RXHN.OB] +10.59%
ANIKA THERAPEUTICS [ANIK] +8.58%
GENETIC TECH SPON [GENE] +7.88%
Diagnostic Substances
GENE LOGIC INC [GLGC] +7.87%
IMMUCOR INC [BLUD] +4.76%
SONUS PHARM INC [SNUS] +4.51%
AMER BIO MEDICA [ABMC] +4.27%
IMMUCELL CP [ICCC] +3.21%
Drug Delivery
ACURA PHARMACEUTICAL [ACUR.OB] +11.22%
DELCATH SYSTEMS INC [DCTH] +3.39%
INSITE VISION INC [ISV] +3.03%
PENWEST PHARM CO [PPCO] +0.47%
Drug Manufacturers
AP PHARMA INC [APPA] +6.76%
ALEXION PHARM INC [ALXN] +2.52%
CARRINGTON LABS IN [CARN] +2.50%
POZEN INC [POZN] +1.80%
NEXMED INC [NEXM] +1.76%
Drug Related Products
N B T Y INC [NTY] +11.17%
CURATECH INDUSTRIES [CUTC.OB] +10.59%
ZILA INC [ZILA] +2.62%
SCHIFF NUTRIT INTL [WNI] +1.77%
PACIFICHEALTH LABS [PHLI.OB] +1.57%
Generic Drugs
CATALYST PHARMACEUTI [CPRX] +5.50%
HELICOS BIOSCIENCES [HLCS] +2.61%
HI-TECH PHARMACAL [HITK] +1.87%
Medical Appliances & Equipment
ARTHROCARE CP [ARTC] +9.50%
MEDICAL ACTION IND [MDCI] +6.53%
QMED INC [QMED] +3.35%
CRITICARE SYS INC [CMD] +3.29%
CRYOLIFE INC [CRY] +3.17%
Medical Instruments & Supplies
KYPHON INC [KYPH] +24.07%
LEMAITRE VASCULAR [LMAT] +9.53%
ROCHESTER MEDICAL [ROCM] +7.23%
PERKIN ELMER INC [PKI] +6.64%
NUVASIVE, INC. [NUVA] +5.86%
Medical Laboratories & Research
HEALTHCARE PROVIDERS [HPRD.OB] +8.15%
RADNET INC [RDNT] +0.48%
PSYCHEMEDICS NEW [PMD] +0.05%
- Thursday’s Top Biotech & Medical Stocks
- Wednesday’s Top Biotech & Medical Stocks
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3 Sell Candidates in Healthcare
by Alan J. Brochstein, CFA
AB Analytical Services
The stock market is beginning to wake up to the rapidly proliferating credit crunch. Many Healthcare investors will no doubt take comfort in recognizing that the sector is extremely immune from these developing macroeconomic issues. If there is one thing that I have learned and learned again, though, is that fundamentals can get lost in the shuffle pretty rapidly when everything is going down. With that in mind, I have identified 3 stocks in the sector that I believe have an especially high risk of experiencing large price declines in the coming weeks. Using StockVal, I created a screen that would quickly help me potentially identify stocks with certain characteristics. In particular, I was looking for stocks with relatively high PE ratios (>24), that were well above their 52-week low but within 15% of their 52-week high, that have climbed immensely over the past 5 years and that are not experiencing upwards revisions in their earnings estimates. I restricted the list to market caps in excess of $2.5 billion.
The first name is Celgene (CELG), one of the few Biotech names that have been working, though it is lagging the market now year-to-date. This one had a rather good “bad” quarter in Q1, growing “only” 61%, which was well below the growth rates in the prior two quarters. Q2 was definitely better, with the growth picking up to 76%. The stock moved up to it’s the resistance at 61. While it is hard to be fundamentally negative on the name, this is one that profit-taking by some could induce more by others. This one is a 15-bagger over the past 5 years. The key downside support level to watch is 56, my chart-based target is 50, and I would wave the towel at 65.
The second name is Hologic (HOLX), which is a member of my watchlist and which I am actually considering shorting. I mentioned this one in my interview on this website earlier this month. To rehash, I believe that the adoption ramp for digital mammography was much steeper than expected, but that it is a mistake to assume that it will keep up at this pace. The company is in the middle of a big acquisition that was quite expensive as well. As you can see in the chart below, this one has been marking time since it plunged following the deal announcement (CYTC). I know that a certain “Mad” guy loves the stock, but I see an expensive stock rolling over. As you can see, this one is something like a 15-bagger since early 2003. The key downside support level is 51, my chart-based target is 40, and I would wave the white flag at 56.50.
The last name is Stryker (SYK), which dropped a bit today on its rival’s weak report. Historically, this stock is cheap relative to its own history, but it still is being valued somewhat highly. The industry has had some issues over the past few years. While this stock is not up nearly as much as the other two, it still has more than doubled over the past five years. The key support is 63, the chart-based target is 55 and the stop-loss is at 68.
AB Analytical Services is a regular contributor to BioHealth Investor
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