What’s Moving These Biotech Stocks?

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

As one of the most important conferences in biotechnology approaches (ASCO) we are seeing wild swings of volatility. On Thursday there were several stocks that moved to the downside, and in this piece I am determining if any are a buy after the large moves.

Ariad Pharmaceuticals (NASDAQ: ARIA)

Shares of Ariad Pharmaceuticals fell more than 4% after a report from Fox News suggested that cancer patients are now electing to skip chemotherapy and other cancer treatments due to new tools that are being offered. The stock has already lost 14% of its value in 2013 as questions arise regarding its newly launched drug Iclusig, and investors will seek answers at ASCO.

The key question as ASCO approaches will be how data from other studies could impact future performance of Iclusig and if the drug can still grow in the community setting. In addition, investors want to see a continuation of strong sales seen in Q1 along with details surrounding conflicting data and recent patient deaths. With the stock continuing to tick lower, investors appear worried, thus I am not sure that I would buy with the company valued at $3 billion ahead of ASCO.

Infinity Pharmaceuticals (NASDAQ: INFI)

Bearish comments from JPMorgan regarding Infinity Pharmaceuticals pushed shares lower by more than 20% on Thursday. The loss came as investors grow skittish ahead of data at ASCO, and JPMorgan reminds those investors of why they should be worried. The questions are in regard to its investigational leukemia candidate IPI-145, for which JPMorgan predicts “a good showing.” However, the problem is how congested the market has become, and the number of big name biopharmaceutical companies expected to release better data, such as: Gilead Sciences, Pharmacyclics, and Roche.

Infinity Pharmaceuticals is a $1.2 billion company that is valued on not just one product but rather a therapeutic approach that could create numerous products, with IPI-145 being the most advanced. Therefore, with several years before seeing significant revenue (if the IPI-145 data is strong) and with a congested leukemia market I say avoid Infinity for now.

Oncothyreon (NASDAQ: ONTY)

Oncothyreon fell 24% after its ASCO presentation showed that its vaccine L-BLP25 (formerly Stimuvax) did not meet its primary objective. Back in December the drug failed in a large Phase 3 trial thus leading to a 50% decline in its valuation. Since then the company has said that there were certain subgroups where notable treatment effects were observed.

This is a typical trick in biotechnology after a failed trial, as a company will try and sell “subgroup data” over a larger failed study. When you think about it, searching through hundreds of patients to find a few who had both a disease similarity and the greatest overall outcome might be easy, and definitely can keep a biotechnology company alive. However, I see no real upside or value in shares of this company, and believe it is a sell after a failed “L-BLP25” study.

Conclusion

The biotechnology investment game in a risky business, as a stock can go from gains to losses in the blink of an eye. Sometimes the movement is an overreaction, and you can use the losses to your advantage (as explained here), but sometimes those large losses are an indication of what’s to come. With each of these three stocks in particular, I don’t see much upside, as there seem to be many questions surrounding each company’s future. However, the good thing about biotechnology is that looks can be deceiving, therefore perform your own due diligence and create your own opinions of these high-profile stocks, and you might find a golden opportunity.

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Brian Nichols 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!

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