Wild price swings in biotech stocks are commonplace. That's what makes this sector so much fun -- or perhaps nauseating.
Even so, it's always important to know why some stocks are popping or dropping. Dramatic sell-offs can sometimes lead to bargain buys, but they can also lead to ruin. By contrast, meteoric rises are all too often followed by equally impressive crashes. At the end of the day, it's all about the nature of the catalyst driving the movement.
Here is a Fool's take on three biotechs that have made major moves this week.
ImmunoGen (IMGN) cratered 18% Tuesday and continued to fall Wednesday after pulling the plug on its lung cancer drug trial. The company's drug, IMGN901, was in the midst of a mid-stage trial when an independent monitoring committee deemed the drug unlikely to provide enough of a benefit compared to existing therapies to justify continuing the trial. Shares plunged largely because this failure sinks the near-term prospects of ImmunoGen's pipeline.
The good news is that ImmunoGen does have a good bit of cash on hand and should be able to survive this setback without much of an issue. Moreover, ImmunoGen should see more good news for its breast cancer drug Kadcyla before the end of the year. Kadcyla is licensed out to Roche (RHHBY -1.70%) and is expected to be approved in Europe in late 2013. An approval in Europe should quicken the pace of milestone and royalty payments owed to ImmunoGen, fattening the company's bottom line. Although this clinical failure was a disappointing outcome, ImmunoGen is not a one-trick pony. As such, Fools may want to keep a close watch on this biotech.
Immunomedics (IMMU) continued its slump by dropping yet another 13% on heavy volume the last two days. As I pointed out earlier, Immunomedics started this cliff dive after the termination of a licensing deal with Takeda Pharmaceutical last month. And it seems like good news doesn't even matter anymore. Last Tuesday, Immunomedics released a fairly positive earnings report showing a $4.4 million increase in revenues due to a licensing fee received from Algeta for the supply of clinical-grade epratuzumab. The company also announced positive developments in its clinical pipeline with 90 Y-clivatuzumab tetraxetan expected to begin a late-stage trial in early 2014. If that wasn't enough, Immunomedics also received a key patent for their proprietary TROP-2 Antibody on the same day.
Mr. Market, however, keyed in on the one negative: Takeda Pharmaceutical now believes the deal over veltuzmab was wrongly terminated. My take is that this drop is way over done. Immunomedics has at least a year's worth of cash on hand, a robust pipeline that is showing great promise, and a strong history of signing licensing deals. Even though it's always hard to call a bottom, it can't be far off. There isn't anything fundamentally wrong with the company, and the future looks promising. Foolish investors should definitely dig deeper into this oversold biotech.
Geron (GERN -0.56%) popped as high as 95% on heavy volume yesterday after its imetelstat treatment for the bone-marrow disease myelofibrosis showed positive results. Specifically, an abstract of the early-stage study was published for the upcoming American Society of Hematology meeting, and it reported promising results in terms of both safety and efficacy for the drug. Of particular interest was that patients receiving imetelstat treatment showed a 44% overall response rate for a disease that is notoriously difficult to treat.
The market's reaction to this news, however, appears to be a tad premature. Shares have thus pulled back dramatically from their intraday highs yesterday, and continue to slip further today, as the market digests this news.
Even though this clinical trial data is promising, it's important to understand that this was only a pilot study rather than a late-stage trial. Simply put, Geron has a lot of work ahead in order to get imetelstat into advanced clinical trials and eventually under review at the FDA. Foolish investors may thus want to sit on the sidelines until the company lays out a clear plan for the drug's development.
