The markets over the past few weeks may have exhibited what you consider full-fledged panic, but it pales in comparison to what happened to Omrix Biopharmaceuticals (NASDAQ:OMRI) yesterday.

Its stock dropped almost 35% -- far more than the market's "mere" 7.6% -- after the company said it was suspending the phase 2 trial of its fibrin pad. The pad is designed to stop surgical bleeding, but the company is investigating an "incident of post-operative bleeding." While that sounds bad, and ironically comes just a day after the company said the trial had met its primary endpoint and would continue only to get enough safety data, we don't really know if it's a major issue or just a random event that occurred after the use of an otherwise effective product. It could easily turn out that the trial will resume after the company determines that the patch had nothing to do with the bleeding.

More importantly, it looks like very little of the potential sales of the fibrin pad were being priced into Omrix's stock. Despite its now sub-$200 million market cap, Omrix isn't a development-stage company. It has products on the market sold through partner Johnson & Johnson's (NYSE:JNJ) Ethicon division. Just look at how cheap this stock is compared to its larger biotech peers.

 

Price/Sales (TTM)

Price/Earnings (TTM)

Omrix Biopharmaceuticals

2.7

15.6

Amgen (NASDAQ:AMGN)

3.6

16.4

Biogen Idec (NASDAQ:BIIB)

3.6

17.7

Genentech (NYSE:DNA)

6.8

24.9

ImClone Systems (NASDAQ:IMCL)

9.3

NM

Source: Capital IQ. TTM = trailing 12 months; NM = not meaningful.

For less than three times revenue and 16 times earnings, you can own a company that saw sales jump 72% year over year last quarter while net income doubled. Even if you think there's going to be a huge economic recession, I can't see the demand for products used during surgeries slowing down a whole heck of a lot. The need for operations won't change.

Like many of the picks on the Rule Breakers newsletter scorecard, Omrix is in the red -- although the newsletter is still beating the market by more than 5 percentage points -- but this stock has reached an unbelievable value in my opinion. Smart investors buy when there's blood in the streets; even without its fibrin pad, Omrix has products to stop that bleeding.

Find out why Motley Fool Rule Breakers picked Omrix by checking out back issues of the newsletter. Click here for a free 30-day trial subscription and see all our current and past picks. 

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Johnson & Johnson is an Income Investor selection. Biogen Idec is a Stock Advisor recommendation. The Fool has a disclosure policy.