Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of biotech billionaire Randal Kirk's flagship company Intrexon (NYSE:XON) were up over 14% at 1pm today after the average analyst price target increased to $34 per share. The company's shares had a closing price of $30.15 the previous day.
So what: While the average price target increased to $34 per share -- which is also about where the stock was trading at the time of this writing -- keep in mind that this target is the average of just two analyst estimates. But even if there were 100 analyst estimates, relying on the opinion of Wall Street can be dangerous for individual investors.
The higher price targets appear to be the continuation of Wall Street's excitement over a recent biopharmaceutical deal announced with partner Ziopharm (NASDAQ:ZIOP) and University of Texas MD Anderson Cancer Center for an immunotherapy platform based on CAR-T technology. The original announcement sent Intrexon shares up over 30% in January, although they fell back to earth shortly thereafter.
Why all the excitement? Simply put, CAR-T is the hot new trend in biotech after promising results were announced for several pipeline candidates across the industry. Some even cured several patients of their cancer. That has led to an uptick in IPOs from companies developing related technology and a gold rush to snag platforms from academic labs. Thus, the Intrexon deal with MD Anderson.
However, in my opinion, the excitement over Intrexon's deal is a bit premature. The first clinical trials will begin in 2015, which means any potential products are at least seven years away from hitting the market. That may never happen, as industry experts have questioned the effectiveness of the licensed technology. Additionally, Intrexon is relatively late to the CAR-T party, so by the time it potentially gains approval for a new treatment, the market could be pretty saturated.
Now what: Investors shouldn't give too much weight to analyst price targets, which bear no real meaning to companies or their development and are usually announced days or weeks after a major event occurs. Additionally, Intrexon has a long way to go to commercialize its newly licensed CAR-T platform, which is the driving force for Wall Street's current enthusiasm. While the company has a robust pipeline of biotech products in energy, health care, food, and environmental applications, this move is probably not sustainable.
Maxx Chatsko has no position in any stocks mentioned. Check out his personal portfolio, CAPS page, previous writing for The Motley Fool, and follow him on Twitter to keep up with developments in the synthetic biology field.
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