According to analysts, product developments in the secondquarter are unlikely to turn the biotechnology sector around, aspositive news on most drugs favored for 1993 came in the firstthree months of the year
"There could be positive milestone developments," said analystDavid Webber of Alex. Brown & Sons, "but the market now is inthe mood to discount milestones pretty severely."
Webber said Vestar Inc.'s DaunoXome is one of the fewbiotechnology drugs with a chance of approval this quarter.DaunoXome, a liposomal form of the cancer drug daunorubicin,is designed to treat Kaposi's sarcoma. It was the first liposomaldrug to receive an NDA in the U.S.
"There's no single event or group of events that one couldpostulate would reverse the market psychology in terms ofproducts," Webber continued.
But a clear signal from the Clinton administrationdistinguishing between biotechnology companies and largepharmaceutical companies would dispel one level ofuncertainty for investors, he said.
Biotechnology products should be viewed as part of thesolution instead of the problem, Webber added, since mostrepresent major advances rather than incrementally improved,"me too" drugs.
Analyst Jeff Swarz of First Boston agreed, saying, "Geneticallyengineered drugs are where almost all your drugs are going tocome from in the next decade." Swarz called the attempt torestrain health care costs by focusing on pharmaceuticals,which comprise only 7 percent of the health care bill, "illogical."
Shaving up to 3 percent from that expense won't cure theproblem anyway, Webber said. He sees the drug price issuetargeted to retired people who, as a group, rely more on long-term prescription drugs, while the first trial balloon raisedabout child vaccines generated emotional appeal for the plightof youngsters. These appeals may be contrived to buildemotional momentum for more serious proposals that maycome later, he said.
Indeed, Swarz noted that the "symbolic" bill to provide moreaccess to childhood vaccines was designed to be phased out if acomprehensive health reform bill goes into effect.
And the announcement last week that the health reform taskforce won't be ready to announce a proposal by its self-imposed May 3 deadline could prolong investor uncertainty.Even if the health care announcement is made in June or July,the impact on biotechnology could take longer to discern.
Some observers, such as Jim McCamant, publisher of theMedical Technology Stock Letter, look to upcoming clinical trialresults and conferences for promising signs.
"Things will begin to get better," McCamant said. "The questionis how soon." Swarz calls the market "very, very attractive"with top-tier companies "substantially undervalued."
Smaller companies face near- and long-term peril, however."You can't treat these companies like large pharmaceuticalcompanies and expect them to survive," Webber said. "Therewill be problems for access to capital for smaller firms if thisbarrage continues," Swarz added.
Although agricultural biotechnology companies might havebeen expected to escape the health care doldrums, analystGeorge Dahlman of Piper, Jaffrey & Hopwood in Minneapoliswas "really astounded" at the ag biotech sell-off after the USDApublished its final biotechnology regulations March 30, despitethe regulations being "really what the industry was lookingfor."
Still to come is news on Xoma Corp.'s CD5+, awaiting a decisionon marketing approval for graft vs. host disease; FDA action onCentocor Inc.'s Myoscint cardiac imaging agent; and GeneticInstitute Inc.'s Leucomax, a GM-CSF (granulocyte macrophagecolony stimulating factor) designed for marrow transplants,neutropenia and AIDS.
In addition, analyst Rukmani Ramdharry of Josephthal, Lyon &Ross was heartened to see ProCyte Corp. of Kirkland, Wash.,present results of its wound healing drug Iamin last week atthe Keystone Symposium on Wound Repair in Breckenridge,Colo. Phase III trials in ulcers on the sole of the foot should becomplete in the middle of 1994, spokeswoman Karen Hedinesaid, and the product could be the first biotechnical woundhealing treatment marketed, perhaps by the end of 1995.
Ramdharry also said he likes the share prices of Repligen Corp.,whose Replistatin entered Phase I trials in patients withKaposi's sarcoma. This recombinant platelet factor-4 apparentlyshuts off abnormal blood vessel growth, blocking tumorformation. The company said it will present data at theAmerican Society of Clinical Oncology on May 18 in Orlando,Fla.
Analysts also expect excitement about HIV therapies andvaccines to pick up by the end of this quarter, leading up to theInternational AIDS Meeting takes place in Berlin from June 7-11.
In particular, McCamant mentioned Immune Response Corp.(NASDAQ:IMNR) of San Diego, which has validated results of itsPhase II/III therapeutic HIV vaccine, developed in a 50-50relationship with Rhone-Poulenc Rorer. If results are positive,investor relations spokeswoman Cindy Rollins said, thecompany may file a product license application this year.
The major positive events of the first quarter were:
-- FDA cleared Miles Inc. on Feb. 25 to market Kogenate FactorVIII to people with hemophilia A.
-- An FDA advisory panel on March 21 recommended approvalof Betaseron, a beta interferon analog developed by ChironCorp. and Berlex Laboratories to treat multiple sclerosis.
-- Genentech Inc. filed a product license application March 30for Pulmozyme, its recombinant human DNase to treat cysticfibrosis.
-- Immunex Corp. amended its product license applicationMarch 30 to seek an expanded label for Leukine, a granulocytemacrophage-colony stimulating factor used as an adjunct tobone marrow transplantation. The Seattle company wants thecompound approved to prevent and treat white blood celldepletion following chemotherapy.
-- Nancy Garcia Associate Editor
(c) 1997 American Health Consultants. All rights reserved.