The "Biotech Super Bowl" Starts Tomorrow... Are You Ready?

Marc Lichtenfeld
by Marc Lichtenfeld, Chief Income Strategist, The Oxford Club

The "Biotech Super Bowl" Starts Tomorrow... Are You Ready?

by Marc Lichtenfeld, Healthcare Expert

Thursday, June 3, 2010: Issue #1273

Get your game face on... the "Biotech Super Bowl" starts tomorrow.

We all know about February's NFL version, where people go to parties, eat copious amounts of food and watch the championship game. But tomorrow's summer event is strictly reserved for biotech investors.

It's the annual meeting of the American Society of Clinical Oncology (ASCO), which runs from June 4-8 in Chicago.

For the biotech sector - and investors in it - the ASCO meeting is hands-down the most important meeting of the year. It features doctors, as well as investment professionals and is the place where companies with cancer drugs in development present key clinical trial data.

It's a hugely important event - and biotech investors should have it circled on their calendars. Here's why...

Conference Buzz Blasts Biotech Shares Higher

I first tipped you off about the ASCO conference buzz back in November and again a couple of weeks ago.

That's because, historically, many biotech stocks run higher in anticipation of good news at the conference. Then, after information is presented, the stocks have tended to fall in a "sell the news" reaction - even after positive news.

And once again, we've seen many biotech stocks surge this year, ahead of the ASCO meeting. For example...

  • Celldex Therapeutics (Nasdaq: CLDX) jumped 118% in just over three months before retreating a bit over the past few weeks.
  • Delcath Systems (Nasdaq: DCTH) spiked 306% in less than three months.

Timing Your Biotech Profit Run

Over the past few years, the timeline of the pre-ASCO stock run-up has changed. ASCO publishes "abstracts" (descriptions of the presentations that sometimes contain data) in late May. That releases some of the pressure at ASCO, as investors get a taste of what to expect ahead of time.

But anticipation is still strong. For example, Celldex released preliminary data on its brain cancer drug that seemed to cause some confusion on Wall Street. One analyst interpreted the data as negative, while the rest of the Street believed it was positive. (For the record, it was positive. The analyst got it wrong.)

Celldex will release the full data at ASCO and the stock could have a very strong reaction depending on which way the information goes.

But it's certainly not the only one...

Two Companies to Watch At ASCO

Other companies presenting important data at ASCO include...

  • Celgene (Nasdaq: CELG): The firm will discuss a Phase III trial of Revlimid and its ability to reduce the risk of tumor progression in multiple myeloma.
  • Ziopharm Oncology (Nasdaq: ZIOP). Ziopharm will go over its Phase II trial of palifosfamide, which nearly doubled progression-free survival in patients with soft tissue sarcoma.

However, considering that many of the ASCO-presenting companies have already released partial data, I'd wait to see how these stocks perform post-ASCO before jumping in.

That's because while there could always be a surprise, many stocks have already moved. But by waiting until after the event, you might be able to pick up some cancer stocks for a little less money and with less risk.

The Early Researcher Catches the Profits

With this year's ASCO event about to get underway, it's never too early to start researching the biotech companies that could move in early 2011, ahead of next year's meeting.

My tip: Begin by looking for companies currently in Phase II clinical drug trials. Two reasons...

  1. Phase II data often moves a stock sharply. If the news is positive, the drug is perceived to be closer to the goal line.
  2. In the case of unpartnered drugs (ones developed by small biotech companies without the help of a large-cap pharmaceutical or biotech company), the potential for a lucrative partnership increases after strong Phase II data.

The Next Hot Biotech Area

Of course, not all biotech companies are engaged in cancer research. As I've discussed before, I believe the 2010s will be the biotech decade. And there are plenty of companies researching various diseases such as hepatitis, multiple sclerosis, diabetes, etc.

One biotech area that I believe will be huge over the next 10 years is regenerative medicine. A word of caution, though: Right now, it's still in the early stages, so investing in stem cell and other regenerative medicine companies is speculative. But the payoff could be enormous.

Here's what to do this weekend and into next week: Watch how the stocks of the biotech companies presenting at ASCO react, so you can formulate a plan for next year's event. Keep an eye out for companies currently in Phase II trials and add them to your watchlist. (I'll likely report on the companies that could draw attention at the 2011 ASCO meeting as it draws closer.)

And investigate other lucrative biotech areas, too. There's a ton of money to be made in the sector. Be sure you have at least some exposure to it.

And remember... next time you talk to someone about the Super Bowl, tell 'em that there's another one in June, too.

Hoping your longs go up and your shorts go down,

Marc Lichtenfeld

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