The summer doldrums are hitting the biotechs harder than expected. Right now, no news, or even good or bad news is bad news, period. Remember, biotechs follow the academic cycle and in the summer, news flow usually takes a breather. In our opinion, the fundamentals for the sector have not changed. But buyers remain in a trance, which has paralyzed them since the start of July. It’s obvious we are in a downtrend and investors are extremely moody and sensitive to the macro environment - the economy, terrorism, etc. Nonetheless, it has been frustrating and we think the situation should turn around as summer ends. Besides in late July, Legg Mason suggested the biotech sector is undervalued by 15-20% which may help feed the notion that biotechs are nearing bottom and bargain hunting will come.
Meanwhile, Celgene/NASDAQ: CELG reported solid second quarter earnings and for the remainder of the year, we expect positive news to help uplift its share price, such as the approval of Thalomid for the treatment of multiple myeloma. The date for the FDA to decide whether to approve Thalomid is October 22, 2004. Data from several Revlimid trials is expected in the fourth quarter of 2004, including Phase II in MDS (blood cell cancer), Phase II in multiple myeloma, and interim data from Phase III in multiple myeloma.
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