By Jennifer Van Brunt


Recent events in the market seem to indicate that investors are starting to zero in on biotechnology stocks -- at long last. Especially in the past months -- but in the long run since October 1997, nearly a full year ago -- the biotech stocks have been pulled down with the rest of the small capitalization stocks as the global economic crisis continues to breed uncertainty and even fear among once-bullish investors.

But since Labor Day, when the Nasdaq stocks in particular have been alternately soaring and dipping on unsettling political and economic news, the biotech group has held its own.

The NASDAQ Biotech Index hit a nadir of 254.98 on Aug. 31, 1998 -- close to 16 percent lower than its 1997 closing value of 303.1. The index, which is market-valued-weighted, currently comprises 145 stocks that trade on Nasdaq. By Sept. 16, however, the index had recovered admirably: It closed at 300.05, just a hair's breadth below the 1997 close.

Industry analysts and investment advisors point to the rare opportunity that investors now have to buy the severely undervalued stocks of biotech companies with enormous upside potential. Moreover, biotech companies, like the big pharmaceutical houses, are relatively immune to international economic problems -- a big plus in this day and age.

Within the biotech group, there are a few stocks in particular that have become the subject of intense investor interest.

Some of these are old favorites, which tend to move -- often in large blocks -- on changes in analysts' recommendations. Others, however, have been singled out due to important product development news.

Cambridge, Mass.-based Biogen Inc. (NASDAQ:BGEN), for instance, saw its stock price rocket by $14.125 -- or 28 percent -- between Sept. 4 and Sept. 11. Amgen Inc. (NASDAQ:AMGN), of Thousand Oaks, Calif., gained $8.687, or 14 percent, over the same week.

Biogen and Amgen both moved on analysts' upgrades; for Biogen, the tremendous leap was short-lived, as investors quickly took their profits. But some stocks have also moved on FDA actions, not all of them positive.

Aviron Takes A Hit...

The FDA has been full of surprises this year. Its latest bombshell hit Aviron (NASDAQ:AVIR), on Aug. 31, when the agency informed the Mountain View, Calif. company that its FluMist submission was not acceptable for filing. This shattering news pummeled the company's stock, which lost more than 42 percent in value (from $21.688 to $12.500 per share, a new 52-week low and 54 percent lower than its Dec. 31, 1997, closing price of $27.125) on very heavy trading. The FDA asked the company for additional information on the manufacturing processes and facilities where FluMist -- an intranasal influenza vaccine -- will be made.

Since Labor Day, when the Nasdaq stocks have been alternately soaring and dipping on unsettling political and economic news, the biotech group has held its own.

Although there was no mention of issues regarding the safety or efficacy of the vaccine, investors still lost faith and fled from the stock.

Not only does FDA's rejection of Aviron's combined product license application/ establishment license application set the development timetable back, but also Aviron will have to refile the application and perhaps be required to conduct another clinical trial. The company had been anticipating a product launch in time for the 1999/2000 flu season, a schedule that now seems unlikely.

...Genentech Barely Budges...

On the other hand, South San Francisco-based Genentech Inc.'s stock barely budged after an FDA advisory committee voted unanimously to recommend approval of Herceptin, its product for treating breast cancer. The stock (NYSE:GNE) inched up to $67.50 from $66.75, a gain of only 1 percent, on Sept. 3; still, that's 11 percent higher than Genentech's 1997 closing price of $60.625 per share. Since Genentech is still the target of a potential acquisition by its majority shareholder, Hoffmann-La Roche Ltd. -- under which terms the stock already has a ceiling and a floor -- it tends to move sluggishly if at all on news.

On Sept. 2, the FDA's Oncology Drugs Advisory Committee agreed that Herceptin, a humanized monoclonal antibody to the HER2 growth factor receptor, should be approved for treating HER2-overexpressing metastatic breast cancers (about one-third of all breast cancers).

The committee recommended Herceptin's approval as a single agent in second and third-line therapy and in combination with paclitaxel as a first-line treatment. This is the first drug aimed at the underlying molecular mechanisms of cancer; as such, it represents a major breakthrough in molecular biology and -- hopefully -- in the way that cancer will be treated in the future.

...And Immunex Soars Before The Fact

Most recently, investors have zeroed in on Seattle-based Immunex Corp.'s stock (NASDAQ:IMNX). On Sept. 14, just two days before the company's presentation of clinical trial data on its rheumatoid arthritis drug Enbrel to an FDA advisory committee, investors ran the stock up to $61.250; the very next day, however, profit-taking drove the stock down by $3.125 per share on heavy trading, one of the most active Nasdaq stocks that day.

The heavy trading intensified the day after the FDA's Arthritis Advisory Committee's unanimous recommendation for approval of Enbrel, although Immunex's stock price did not regain the points it had lost; in fact, it lost an additional $5.750 to close at $52.375 on Sept. 17.

However, investors pinning their hopes on Enbrel -- recombinant, soluble tumor necrosis factor receptor linked to the constant (Fc) portion of human IgG1 -- have caused Immunex's stock to almost triple in value since the end of 1996 (it closed Dec. 31, 1996 at $19.50 per share).

The FDA's advisory committee recommended that Enbrel be approved for use alone in patients who have failed standard therapies and also for use in combination with methotrexate. Enbrel, too, has joined the ranks of new, biological therapies for dire diseases.

In fact, it's the first biologic that has been shown to relieve the symptoms and slow progression of severe rheumatoid arthritis.

Thus, while biotech investors have recently picked a few high-profile stocks to ride, this renewed interest could spread across the sector -- especially as the data for new biological therapies continue to demonstrate that these products can dramatically improve the treatment of severe diseases.