Hammer Stock Blog

Exelixis (EXEL) came under a lot of pressure recently and the stock is now trading near its 52 week low following two unrelated events that took place last month. In late June, the company announced the resignation of its CEO, George Scangos, who was appointed as Biogen Idec’s (BIIB) CEO. Earlier that month, the company announced BMS (BMY) decided to give back rights for Exelixis’ flagship product, XL184. Adding to the pressure are interesting but not stellar clinical results for some of the company’s compounds at ASCO and potentially an additional partnership termination. (more…)

 The month of December has always been a busy period for biotech investors, due to two important events:  The annual meeting of American Society of Hematology (ASH) and the San Antonio Breast Cancer Symposium (SABCS). Every year, these events produce clinical data that can sharply move biotech stocks in both directions. This year, Immunogen (IMGN) is about to get center stage attention at both events.

At ASH, the company and its partners will present phase I data for three different agents powered by Immunogen’s antibody-drug conjugate (ADC) technology.  The most important of which is Sanofi-Aventis’ (SNY) SAR3419 in Non-Hodgkin lymphoma, a common form of blood cancer. Later that month at SABCS, Roche/Genentech is expected to present results for T-DM1, a high profile ADC for the treatment of breast cancer.

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Only two and a half weeks have passed since the launch of the model portfolio, so it is still too early to assess its performance, nevertheless, even after a sharp decline in two stocks, the portfolio seems more robust than the general market. Since inception, the biotech portfolio, co-managed by Ran Nussbaum and myself is down “only” 3.6%, compared to the Nasdaq and S&P which are down 8.5% and 6.7%, respectively for the same period.    

Based on recent market action and the unprecedented level of anxiety, it seems that the bottom is getting closer and hopefully, the markets will stabilize towards the end of 2008. Therefore, the coming weeks may be a good opportunity for increasing exposure to the stock market, which is why we intend to end 2008 with 90-95% of the portfolio in stocks.

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The past year certainly was not an easy one for Arqule’s (ARQL) investors who saw their shares plummet more than 50%. Perhaps this kind of decline does not look too big of a deal for a small biotech company when compared with “solid” investments such as AIG (AIG) or Citi (C), but the current price level is certainly not what the institutionals who bought $55 million worth of stock for 7.75$ a share last year envisioned. The good news is that now, with a new management team and an imminent partnership deal for Arqule’s lead compound, ARQ-197, the stock represents an opportunity for an aggressive upward move in 2009.

The company has been talking about licensing ARQ-197 for some time now, but based on remarks made by its new CEO, there are active discussions with potential partners that could mature into a deal in the near future. Last month, the Oppenheimer & Co healthcare team issued an insightful report titled “Collaborations as Catalysts” which mentioned ARQ-197 as a potential licensing candidate. According to Oppenheimer, although such a licensing deal could happen already this year, it is more likely to happen next year following the release of clinical data from ongoing clinical trials.

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