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Biotechnology shares rise

Biotechnology shares rose, gaining back value lost following the US terror attacks as investors grew confident that the group may escape some of the impact of a recession and rushed in to pick up small-cap bargains.

Most of the biggest percentage gainers were small companies, including Biotransplant Inc, which rose US$1.30, or 30 percent, to US$5.50 and Ariad Pharmaceuticals Inc, which rose US$0.49, or 25 percent, to US$2.45. Texas Biotech Corp rose US$0.65, or 13 percent, to US$5.65.

Now, some investors say third quarter product sales won't be affected by the economic slowdown and that biotechnology shares fell too far after the Sept. 11 attacks. In the first trading week after the attacks, the NASDAQ Biotechnology Index fell 17 percent, adding to a 23 percent decline since Jan. 1.

"Nothing has really changed as far as the fundamentals of the sector go," said Alidad Mireskandari, co-manager of the Orbitex Health & Biotechnology Fund. "When you look at the sector, you have to say it was severely oversold." Still, shares of large, profitable biotechnology companies, such as Amgen Inc. and Biogen Inc, fell as small companies dominated the rally, a turnaround that surprised investors.

"We thought it would be a large cap lead out of" the recent decline in the market, said Greg Aurand, co-manager of the Orbitex Health & Biotechnology Fund, whose largest holdings include Amgen Inc and Idec Pharmaceuticals Corp.

Shares of Amgen., the world's largest biotechnology company, fell US$0.68 to US$58.77. Biogen Inc, maker of the top-selling multiple sclerosis treatment Avonex fell US$1.38 to US$55.58.

Investor Stephen Flaks, manager of Flaks Partners LP, a hedge fund that invests in biotechnology companies, said shares of small companies with promising pipelines and technologies were "compelling" buys.

Flaks said he was taking advantage of the downturn in the market to load up on shares of Texas Biotech, which markets a heart drug with SmithKline Beecham Plc, and Neose Technologies Inc, which develops technologies for synthesizing enzymes in drugs.

"I was actually surprised after the disaster that the biotechs went down as much as they did," Flaks said. "Biotech is not a safe haven like drug stocks, but on the other hand you're not going to have the earnings recession as in other industries."

Flaks is also buying Immunex Corp, whose shares have tumbled 53 percent this year because the company has been unable to make enough of its Enbrel rheumatoid arthritis drug to meet demand.

Immunex is expected to complete a new plant in mid-2002, resolving the manufacturing constraints.

"I think it's got a lot of room on the upside," Flaks said.

Shares of Immunex moved up US$0.36 to US$18.68.
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