Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!news.media.mit.edu!americast.com!usa-post Newsgroups: usa-today.bonus From: usa-post@AmeriCast.Com Organization: American Cybercasting Approved: usa-post@AmeriCast.com Subject: bonus Thu, Apr 23 1992 Date: Thu, 23 Apr 92 05:38:05 EDT Message-ID: 04-23 0000 BONUS: Stock plunge hurts investors USA TODAY Update April 23, 1992 Source: USA TODAY:Gannett National Information Network Bea Amaral wanted to make a lot of money fast. So in January, the 54-year-old mother of one from Raynham, Mass., dipped into her savings, pulled out $60,000 and spent it all on shares of Cytogen, a little-known but highflying biotechnology company developing a drug to help detect cancer. She giddily paid $30 each for 2,000 shares - even though the stock had risen 164% in 13 months. The day she bought, a Food and Drug Administration panel recommended Cytogen's drug, OncoScint, for full approval. DID AMARAL'S GAMBLE WITH CYTOGEN'S STOCK PAY OFF? "I thought it would go up, up, up," Amaral says of the stock. But it went down, down, down instead. Wednesday, the stock closed at $15 1:2, handing Amaral a paper loss of about $29,000, or nearly 50%, in four months. Ouch! "I just watched and said, `Oh my god, what happened?' " Amaral recalls. WHAT DID HAPPEN? A lot of stock investors wonder the same thing. Cytogen has had lots of company this year. After spectacular gains last year - Immune Response went from $2 7:8 to a peak of $62 3:4, Synergen jumped from $3 5:8 to $70 3:4 - biotechnology stocks have been plummeting. A Smith Barney biotech-stock index is down 39% this year, 47% from its mid-January peak. Meanwhile, the Dow Jones industrial average is up this year. WHO GOT CAUGHT IN THE BIOTECH BUST? Victims of the biotech bust include novice speculators such as Amaral who bought individual stocks. But they also include more conservative individuals who as a group poured money into health-care and biotech stock mutual funds late last year, seduced by the wild gains those funds were registering as the year closed. The Fidelity Select Biotech Fund gained 100% last year. But like Cytogen, Amgen, Repligen, Immunogen and countless other "gens" down sharply this year, the Fidelity fund is collapsing, down 25% in four months. JUST HOW PROFOUND IS THE PLUNGE? Consider Japan's stock market, which also has been making headlines for dropping more than 50%. But that drop took longer than two years. Biotech stocks have compressed a comparable plunge into a few months, leaving investors numb. Because of the steep slide, biotech stocks may now look attractive to bargain-conscious investors. Industry power Amgen, for example, down 30% from its January peak, rebounded 2 7:8 Tuesday after reporting 72%-higher first-quarter earnings. DO JAPANESE STOCKS LOOK ATTRACTIVE BECAUSE THEY HAVE FALLEN 50%? They don't to many market experts, who seem to lower their market predictions every time the market takes another tumble. The same may now be said of biotech stocks. "They may still have room to slide," says Denise Gilbert, analyst at Smith Barney. WHAT'S BEHIND THIS YEAR'S BIOTECH SELL-OFF? Bad news. Biotechnology stocks have always been news-driven. Good news, such as a favorable FDA review or test result about drugs in development, can send a stock soaring. Bad news - delays at the FDA, a skeptical trade-journal story - usually does the opposite. Best example: Malvern, Penn.-based Centocor. It hit a high of just more than $60 in January as investors assumed the government would approve its drug, Centoxin, which is supposed to fight a deadly bacteria infection most common in surgery patients. Last week, Centocor announced the FDA wouldn't approve Centoxin after all. WHERE ELSE HAS BAD NEWS AFFECTED A COMPANY'S STOCK? MGI Pharma announced last week that it was suspending development of a drug to treat certain side effects of chemotherapy after tests proved it ineffective. U.S. Bioscience, MGI Pharma's main competitor, learned in February that the FDA would not approve a competing drug. And Immunex fell 25% the day after it announced it was suing its marketing partner for giving the drug away. All three stocks recently hit 52-week lows. WHAT ELSE IS BEHIND THIS YEAR'S SELL-OFF? A new focus. Investors stayed with biotech, medical, drug, food and other recession-resistant stocks through the economic downturn. But since January, cyclical stocks - those that tend to rebound fastest as the economy recovers - have been the rage. To buy auto and manufacturing stocks, many investors sold the previous favorites. "Investors want to be at the right place at the right time," says Joyce Lonergan, analyst at Cowen & Co. "Maybe they feel the bloom is off the biotech rose and are looking for an economic safe haven." IS ALL HOPE LOST FOR CYTOGEN? Cytogen's new cancer-detection drug, called OncoScint, has a good chance of getting full government approval in June. Indeed, despite the carnage in just about all biotech stocks, industry supporters say the industry is by no means dead. Six new drugs developed by biotech companies are expected to be approved by the FDA this year, including OncoScint - though all are likely to be modest money makers, generating revenue of less than $100 million a year. "None by itself will be able to rally the whole industry," says analyst Gilbert. WHAT HAPPENS NOW? Analysts say investors likely will begin to give companies a fairer value, reflecting earnings and revenue - not dreams. That will favor established biotech companies with proven products. Analysts especially like Amgen (revenue of $682 million last year), Chiron ($119 million) and Genzyme ($109 million). "Long-term, this is an incredible buying opportunity," Lonergan says. "Just remember that there's going to be some losers along the way." Bonus Editor: Michele Coleman. (1-919-855-3491) Making copies of USA TODAY Update (Copyright, 1992) for further distribution violates federal law. This article is copyright 1992 Gannett News Service. Redistribution to other sites is not permitted except by arrangement with American Cybercasting Corporation. For more information, send-email to usa@AmeriCast.COM