Biotechs tend to shoot up so much after successful binary events that it may seem like buying them on sales isn't all that important. But if you can purchase the stock while the pessimism has reached a climax, you can increase your returns if things go well and add in a margin of safety if things don't go as planned.

I ran a screen for drug companies trading at least 50% below their 52-week high. I eliminated the companies with market caps below $200 million, because most of the stuff on the clearance rack is junk. We're looking for quality companies on sale.

Here are five I think are worth a closer look.

The failed launch
At least three companies from the screen are there because their drug launches didn't live up to expectations.

The FDA approved Dendreon's (Nasdaq: DNDN) prostate-cancer treatment, Provenge, last year, but because the treatment is produced using the patient's own cells, the company needed to build new manufacturing plants to sell Provenge in mass.

But when the plants were built and the original plant expanded, Dendreon couldn't hit its goal of full-year revenue of $350 million to $400 million, with half of that coming in the fourth quarter. The company believes this isn't an issue of demand so much as a payment problem, given the high cost that doctors have to pay and then be reimbursed by insurers and Medicare for.

Human Genome Sciences (Nasdaq: HGSI) and GlaxoSmithKline did something that no drugmaker has done in half a century: They got a drug approved specifically to treat lupus. But doctors have been slow to prescribe Benlysta, possibly because lupus isn't a life-threatening disease. In fact, it's one of those diseases that waxes and wanes, so only a subset of patients will be complaining about their symptoms at any point.

Avanir Pharmaceuticals' (Nasdaq: AVNR) Nuedexta is in the same situation as Benlysta. The drug treats pseudobulbar affect, uncontrollable outbursts of crying or laughing that's a symptom of neurological diseases or injuries to the brain. Although certainly embarrassing and worthy of treatment options, there's no real urgency to treat pseudobulbar affect. Doctors can prescribe it to a few patients, see how it works, and then increase their prescription rate if they're satisfied with the drug.

Waiting
Other drug-less biotechs have been knocked down because waiting for their drug launches is apparently too much to ask of short-term-thinking investors.

Exelixis (Nasdaq: EXEL) got knocked down after the company said it couldn't come to an agreement with the FDA over how to test its cancer drug, cabozantinib. The company is proceeding on its own, testing the drug as a treatment for pain in prostate cancer and it's already posted positive data in medullary thyroid cancer. Yes, the stock is more risky than if the FDA had given Exelixis its blessing on the trial design, but Exelixis still has a solid drug that should be able to improve survival and get approved that way even if the pain indication fails.

MannKind (Nasdaq: MNKD) is taking longer to get its inhaled insulin product, Afezza, on the market because the FDA wants to see additional data showing that the devices used in the clinical trials are the same as those that will eventually be marketed. A delay, especially for a company that's substantially in debt to its founder, isn't ideal, but I think MannKind should be able to eventually get its device on the market.

Amarin's (Nasdaq: AMRN) investors have been waiting for a buyout after a pair of successful phase 3 trials for its triglyceride-reducing drug AMR101. Every day that the buyout doesn't come, investors rightfully get a little more worried that no one is interested in the drug. If you think Amarin can market the drug on its own, the knocked-down price looks more reasonable.

Reality check
I've had a bearish CAPScall on Vertex Pharmaceuticals (Nasdaq: VRTX) for two years. Incivek clearly works, but it just seemed to me that investors had already priced in sales of the hepatitis C treatment. I wasn't counting on a drop in the stock -- it was more a bet that the company couldn't keep pace with the overall market -- but Vertex has dropped about 27% since I made the call and substantially more from its high set back in May.

The drop seems a little ridiculous considering how well the launch of Incivek is going. It's true there's plenty of competition in the hepatitis C space, and early data for drugs in the competitors' pipelines suggests that Vertex won't hold its front-runner status for more than a couple of years. But Vertex has other drugs -- a cystic fibrosis drug that's already under review by the FDA -- and it's not going down without a fight in the hepatitis C market.

I'm going to switch my CAPScall on Vertex. I'm not sure whether Vertex has bottomed -- that's a hard call to make -- but it's certainly looking more appetizing at these knocked-down prices.

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