Following The Market - Part 2

Summer was a rough period for the biotechs, and now investors are wondering if we are approaching the bottom for the sector. Bottom will only be obvious in hindsight, but we are inclined to believe that we are almost there. Several times, we experienced an oversold bounce within a downtrend. At its worst moment, the NASDAQ biotechnology index (NBI) lost 14%. Currently the value year-to-date is 6%. So far in 2004, the NBI has slightly underperformed the Dow-Jones Industrial Average and has performed better than the NASDAQ composite.

While companies generally met or exceeded earnings expectations for the second quarter, they did not significantly raise earnings forecasts. And in a bear market, especially one accompanied by the threat of rising interest rates, valuation multiples are typically compressed. Historically, tighter monetary control has adversely affected the sector but showed a disproportionate impact on the small-cap stocks. Over the past 23 years, during the eight periods of interest rate tightening, small-cap biotech has underperformed the broader indices. Interestingly, during the last ten years in which two periods of interest rate hikes occurred, the large-cap biotech group has outperformed the broad market.

One company that we project to do very well is Gilead Sciences/NASDAQ: GILD. Recently, Gilead Sciences announced earlier-than-expected final marketing approval from the FDA for Truvada, a combination of Viread plus Emtriva, for the treatment of HIV infection. The product's PDUFA action date was September 12th. Then on August 26, the company announced preliminary analysis of a late-stage trial Truvada was better able to control levels of HIV than Combivir, GlaxoSmithKline's drug. The favorable results were seen in a review after 24 weeks of an ongoing 48-week trial comparing the medicines. The preliminary data showed 88% of patients taking its drugs got their levels of HIV down to less than 400 copies/mL, compared to only 80% of patients receiving Combivir, a statistically significant difference.

Investors should expect strong and steady uptake of Truvada, as the drug will establish itself as the preferred backbone for HIV treatment regimens, offering as good an efficacy as any regimen, and a superior side effect profile. Truvada's launch will continue to drive Gilead's share price for the remainder of the year. Truvada's biggest impact will come in its ability to leverage Viread's leading market position as well as to drive Emtriva's market penetration.

Gilead Sciences has a diverse product portfolio based on its core competency in infectious diseases and oncology. With the anticipated strong sales of Truvada, target price for Gilead Sciences has been revised to $72 per share.

It now appears that share prices have leveled off. We anticipate the biotech sector will rebound as investors anticipate news flow that will likely come this fall when investment banks will be holding biotech investor conferences in September and October. The medical meeting calendar also gets busy for the rest of the year. In our current issue, we cover what's in store for the balance of the year.

Nadine Wong


Information transmitted via has been provided by publisher, Nadine Wong, of the "Biotech Sage Report" Investment Newsletter and all comments and opinions are solely those of Nadine Wong. Information provided is not guaranteed as to completeness or accuracy by Nadine Wong (the "Biotech Sage Report" publisher), BioSpace, Inc., or any person. Such Information is neither an offer to sell nor a solicitation to buy the securities of any company. The security portfolio of the editor of this newsletter, our employees, principals or affiliated companies may, in some instances, include securities and/or options on securities mentioned in each issue. Additional information is available upon request. Information in this publication has been obtained from sources believed to be reliable, but the accuracy, completeness and interpretation are not guaranteed. Opinions expressed are subject to change without notice. The Information and views provided by the "Biotech Sage Report" Newsletter are prepared by Nadine Wong, and in no way reflect the views or efforts of BioSpace, Inc., any of BioSpace's employees or officers. BioSpace, and BioSpace's employees and officers, as well as ( Wong & Wong, Inc, and Wong & Wong Inc.'s employees and officers, in no way accept responsibility for any of the Newsletter's content.

While all reasonable care has been taken to ensure that the Information contained herein is presented in good faith, and is not untrue or misleading at the time of publication, BioSpace, Inc. and Nadine Wong make no representation as to its accuracy or completeness and it should not be relied upon as such. The Information is supplied on the condition that the reader or any other person receiving the Information will make his or her own determination as to its suitability for any purpose prior to any use of the Information. From time to time, BioSpace, Inc. and any officers or employees of BioSpace, Inc., as well as Nadine Wong and or ( Wong & Wong, Inc., and any officers or employees of Wong & Wong, Inc., may, to the extent permitted by law, have a position or otherwise be interested in any transactions, in any investments (including derivatives) directly or indirectly in the subject of this report. Also BioSpace, Inc. and ( Wong & Wong, Inc., may, from time to time solicit business from any company mentioned in this report. This report is provided solely for the information of viewers of and/or viewers and subscribers of the Newsletters, who are expected to make their own investment decisions without reliance on this report. Neither BioSpace, Inc. nor any officer or employee of BioSpace, Inc., nor Nadine Wong or ( Wong & Wong, Inc., or any officer or employee of Wong & Wong, Inc., accepts any liability whatsoever for any direct, indirect, special or consequential damages or loss arising from any use of this report or their contents. This report may not be reproduced, distributed or published by any recipient for any purpose without the prior express consent of the publishers. Nothing contained herein shall be construed as conferring by implication, estoppel or otherwise any license or right under any patent, trademark or copyright of, Nadine Wong or ( Wong & Wong, Inc., or any third party.

The value of the investment(s) to which this report relates and their income yield(s) may go up or down. The investment(s) referred to in this report may not be suitable for private investors: if you are in any doubt you should seek advice from your investment advisor. Changes in rates of currency exchange may have an adverse effect on the value, price or income of investments. Statements as to past performance of any investment are not a guide to future performance. The levels and bases of taxation can change, and if you are in doubt you should seek independent professional advice. In some cases it may be difficult for you to sell or realize your investment or to obtain reliable information about its value or the extent of the risks to which you are exposed.


Back to news