Biotech's Falling Fortunes Stymie Osiris' Huge Week
Aug 17th 2013 4:00PM
Updated Aug 17th 2013 4:02PM
Biotech's the biggest boom-or-bust business on the market, with regulatory approvals and clinical trial results routinely sending stocks hurtling up or down by significant amounts. The industry had a rough week as a whole, as the Nasdaq Biotechnology Index followed up on last week's losses with an ugly 2.8% plunge this week. But in an industry like this, there are always big gainers and big losers every week - and this was no exception.
From buyout questions to the reception of strong clinical data, let's check out what moved biotech over the past five days.
Buyout talk on hold
Onyx Pharmaceuticals certainly didn't help the index out this week, as shares of the big biotech lost almost 9% for the week. Buyout rumors have raged around Onyx for some time now, and while those have helped the stock gain more than 20% over the past three months, the past month hasn't been so kind for the firm: Onyx has lost nearly 13% over that span, particularly exacerbated by the past week.
Amgen was responsible for much of Onyx's fall, as the company requested data from a trial of Onyx's cancer drug Kyprolis before progressing with negotiations. Amgen's been one of the names most closely tied to an Onyx buyout, and Kyprolis would fill in a big need for Amgen's future sales. Analysts have pegged the drug's peak sales at $1.5 billion. Onyx fears that accessing the ongoing trial data could influence the trial itself, but some analysts are concerned that Amgen's using the trial as leverage to wager a lower buy price out of Onyx.
Still, a report from Reuters recently claimed that Amgen was closing in on a $9.5 billion offer for Onyx, something that would boast a $1 billion premium over Onyx's current market cap. Even a slight decrease would be a win for investors.
Buyout talk is swirling around orphan drug star Alexion Pharmaceuticals as well, but caution around the acquisition suggestions took Alexion's stock down almost 8% for the week. Big Pharma giant Roche had been rumored to be looking for financing to acquire Alexion, but analysts have recently given the thumbs-down to the possibility after nebulous comments from Roche's CEO.
Alexion could use the boost, given that it's up only around 5% year to date. For now, however, it looks like we'll have to wait on whether Roche is gearing up for a costly buy.
Those are two big losers for the sector this week, but little Osiris Therapeutics kept biotech from an even worse week, as its stock catapulted higher by a ridiculous 86% over the past five days. Osiris won FDA approval for its Grafix stem cell wound treatment back in 2010, but the drug hit its primary endpoints in a recent clinical trial.
Grafix scored a big win in treating diabetic ulcers in the trial, and analysts are more optimistic that the data will help boost sales of the drug. Sixty-two percent of trial patients using the drug achieved a closure of wounds, more than triple the number who hit the mark in a control group.
Considering how prevalent diabetes is and how much it's growing -- the International Diabetes Federation expects the worldwide diabetes population to grow to 552 million patients by 2030 -- any advance in this area for Grafix and Osiris is a welcome one by investors.
Osiris's giant surge is the perfect example of the huge rewards investors can make in the biotech sector. While Osiris investors are cheering, biotech is one of the biggest risk/reward sectors out there. It's important to diversify your portfolio-after all, the best investment strategy is to pick great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" not only shares stocks that could help you build long-term wealth, but also winning strategies that every investor should know. Click here to grab your free copy today.
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