Biotech Gets a Boost on Tuesday, but Will it Continue

Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

It doesn’t matter if the market trades higher or lower by 2%, the biotechnology industry and its components march to the beat of their own drum. Every year biotech stocks lead the market in being the best performers, and it’s almost always a small or midcap stock that rallies to post large gains. Therefore, in this article I am looking at four stocks that rallied higher on Tuesday for various reasons, all of which could see further gains.

<table> <tbody> <tr> <td> <p>Company</p> </td> <td> <p>Ticker</p> </td> <td> <p>Jan. 8 Performance</p> </td> </tr> <tr> <td> <p><strong>The Medicines Co.</strong></p> </td> <td> <p><strong><span class="ticker" data-id="204412">(NASDAQ: <a href="">MDCO</a>)</span></strong></p> </td> <td> <p>11.66%</p> </td> </tr> <tr> <td> <p><strong>Cell Therapeutics</strong></p> </td> <td> <p><strong><span class="ticker" data-id="215552">(NASDAQ: <a href="">CTIC</a>)</span></strong></p> </td> <td> <p>25.38%</p> </td> </tr> <tr> <td> <p><strong>Arena Pharmaceuticals</strong></p> </td> <td> <p><strong><span class="ticker" data-id="206618">(NASDAQ: <a href="">ARNA</a>)</span></strong></p> </td> <td> <p>9.89%</p> </td> </tr> <tr> <td> <p><strong>Star Scientific</strong></p> </td> <td> <p><strong><span class="ticker" data-id="205596">(NASDAQ: <a href="">STSI</a>)</span></strong></p> </td> <td> <p>8.03%</p> </td> </tr> </tbody> </table>
  • The Medicines Co. reached six-year highs on Tuesday after the company announced positive Phase 3 results for its antiplatelet drug Cangrelor. The drug was compared to a standard-of-care treatment and demonstrated a statistical significant improvement. Therefore, the company will now seek an E.U. and U.S. approval. The company has continued to see solid top-line growth over the last six years, but has recently slowed. This new product launch could revamp sales and lead to significantly larger gains over the next year, making it a stock worth watching.
  • Cell Therapeutics bounced off 52-week lows to rally 25% on Tuesday. There doesn’t appear to be any legitimate news that sparked the rally. However, this is a stock that has a long and storied history of such pops and then an ultimate decline. Personally, I have always cheered for this company and have believed that it has been shorted in FDA discussions. But now with an accumulated deficit of $1.8 billion and unprecedented dilution, I can’t find one reason to buy it.
  • Arena is now gearing up for what could be the largest launch of the last decade with its weight loss drug Belviq. After months of flat trading, the stock got a lift from its competitor VIVUS, after seeing strong prescription data for VIVUS’ approved weight loss drug. This bodes well for Arena because of its marketing flexibility compared to that of VIVUS. Futhermore, investors are anxiously awaiting a decision from Europe, an approval that could significantly increase its revenue. The stock now looks as though it could trend higher, as investors jump back aboard what could be a fun ride.
  • Star Scientific began Tuesday with premarket gains of nearly 20% but then closed with gains of just 8.%. The stock jumped big following preliminary results from its thyroid study on the impact of a dietary supplement. Yet despite this rally on Tuesday the stock is still trading with a loss of near 40% during the last six months, which means the stock could see a reversal following this news of preliminary data.

These companies are developing different kinds of products, to treat different diseases, and are at various stages of development. The only similarity are the gains on Tuesday and each stock could add to the rally seeing as how each had some technical catalysts behind the rally. As a result, I would take time to perform due diligence, and possibly invest in one of these companies that could rally higher in the coming days.

BrianNichols has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus