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by Richard Daverman, PhD
Centient Biotech Investor



Biotech suffered a small decline over the last week. After a 1.5% drop on Tuesday sent biotech to a 2007 low, the sector recovered some of its losses as the week wore on. Over the five sessions, the Centient Biotech 200™ slipped 20 points lower to 3802, a loss of .53% on the week. That puts the index in almost the exact middle of its 52-week trading range: 7.5% below the January high of 4112, and 8% above the 3715 low of last July. So far in 2007, the CBT 200™ is down 3%. Last year, biotech significantly underperformed the broad market averages; this year they are closer: both the S&P 500 and Nasdaq are about 2% lower since January 1.

The breadth numbers, however, paint a somewhat weaker picture. There were only 65 biotech companies that moved higher in the last week, against 147 companies that gave up ground, which means that the biotech list had 2.3 declining issues for every advancing one. That is much more negative than the loss of only half a percentage point in the CBT 200™ index. Only 11 biotechs gained 10% or more, while 13 companies lost a double-digit percentage, a ratio of 1.2 big losers for every big winner. The average share of a member of the CBT 200™ (taking away the market capitalization of the index) lost 1.34%, which was also considerably above the .53% decline in the index itself. The breadth numbers show that many of the smaller-cap biotechs were moving lower, while the big caps provided some stability in the index.

The IPO market was fairly quiet last week, with only the advent of Tongjitang Chinese Medicines (TCM) breaking the calm (see story). To attract investors, the shares of Tongjitang suffered a fairly intense haircut, dropping the price to $10 from an expected range of $15-$17. And it traded 25 cents lower in its first session. But the offering did show that investors continue to like Chinese companies, even after the late-February pullback in the Chinese markets. There are no biotechs scheduled to make their IPOs in the next two weeks.

Even the list of recent IPOs, which has claimed bragging rights for its relative strength over the past six months, was weaker last week. The average recent-IPO stock fell 1.34% over the five sessions, leaving the average company with a 27% gain since its IPO. However, on the positive side, Molecular Insight Pharma (MIPI) led the upward charge with a 17% increase last week. The underwriters gave the stock strong buy ratings following expiration of the 30-day blackout period that follows an IPO. The stock is up 11% since making its debut on February 1.

On the CBT 200™ list, the biggest winner was Micromet (MITI), with a gain of 30%. The company out-licensed a cancer drug to Tracon Pharma, a privately held firm, for upfront and milestone payments that could reach up to $100 million. The cancer compound, which is an anti-angiogenesis drug that targets the D93 antibody, is expected to begin clinical trials in the second half of 2007. Micromet rose 75 cents to $3.25.

La Jolla Pharma (LJPC) garnered second place with a 23% jump. During the previous week, the company reported strong interim biomarker results from its new Phase III trial of Riquent, a lupus drug. La Jolla Pharma received a couple of upgrades this week, which kept the momentum going. Riquent received an approvable letter from the FDA in 2004, but the agency asked for more data. La Jolla Pharma climbed an additional $1.35 to $7.26.

Critical Therapeutics (CRTX) was a 19% winner, moving up on news that it will co-promote its asthma drug Zyflow with Dey, a unit of German Merck. Also, the two companies will both market a drug for COPD. Critical Therapeutics traded 35 cents higher to $2.15.

Avanir (AVNR) gained 18% on news of a boardroom shuffle. Keith Katkin became President and CEO, replacing Eric Brandt, who left for another position. Avanir ended at $1.37, a rise of 21 cents.

There are now just two weeks left in the first quarter of 2007, so the CBT 200™ has only 10 sessions to erase the 3% decline it has suffered so far this year.


Source: CentientInvestor.com



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