If you're a biotech investor, you might have been pleasantly surprised by your stocks' performances on Monday, especially if your holdings include small or mid-sized companies that are targeting cancer. The Biotech HOLDRS
The reason: the American Association for Cancer Research (AACR) meeting going on in Orlando is highlighting many advances in cancer treatment, detection, and prevention. These meetings feature scientists from industry and academia, but it's usually the industry presentations that get the biotech investor's pulse rate up.
But there's a problem: You have to be in Orlando to see them. That's no problem, say the biotechs, we'll put out press releases to keep our dear investors informed! And so there is a plethora of clinical trial updates, basic research leads, and general progress reports.
Naturally, these press reports are all very encouraging, and so the job of sorting out the truly impressive news from the merely upbeat falls to the investor.
Generally, I would advise a biotech investor to ignore most of the preclinical data presented at these conferences, unless the data show something really new or spectacular. The old joke about how many times we've cured cancer in mice is true. It's quite difficult even for a "pro" to sort out preclinical data, so I look for human trial results.
Usually phase 1 trials do not have much data showing efficacy, but this one was an exception. Results showed that three out of 18 patients with advanced, metastatic breast cancer who had failed both Genentech's
Besides cautioning investors on reading too much into preclinical data, I would also caution against buying in the middle of all the conference "buzz." As volatile as these small biotechs are, the investor can often wait a few days or weeks and buy in at a lower price. For example, OXiGENE
It's likely that there will be several more such "winners" who will emerge from this conference. I hope your stocks are among them!
Looking for small but promising companies still underneath the Street's radar? Then Motley Fool Hidden Gems is the newsletter for you. Each month, Tom Gardner and his merry band of guest analysts highlight two stocks you should take notice of. Take a free trial on us.
Fool contributor David Nierengarten, Ph.D., works with a biotechnology venture capital fund. He is an active member of the TMF community as DavidMN, and enjoys the Biotechnology discussion board. He holds no positions in any of the companies listed.