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February 12, 2007
A Good Day's Work
So, you're asking yourself, "Why do people invest in biotech and small-pharma stocks?" You could especially ask yourself that after reading this New York Times article from Sunday, which describes how Xoma (yep, they're still around) has vaporized $700 million dollars, and counting, in its 25-year history.
Well, here's why: as I write this, Onyx Pharmaceuticals is up a solid 90% on the day. They're partners with Bayer on the kinase inhibitor Nexavar (sorafenib), and the companies today reported positive data in treating hepatic cancer. This wasn't long after the drug had pretty much whiffed on melanoma, so the news came as a bit of a surprise (thus that 90% updraft).
My guess is that it came as a surprise to the people doing the study as well. Liver cancer is a bigger market than anything that Nexavar is approved for, and you'd think that it would have been one of the first trials run if it were considered a high-percentage play. But cancer is tricky, and we don't understand it worth beans. You have to do the experiments, and you have to realize going in that you only have a vague idea of how they might go.
So that's one reason that biotech stocks continue to get buyers - for the same reason that lottery tickets do. It would be interesting to know which one has returned more money over the years, although I'm afraid I already know the answer. But long-term, biotech has the edge, because (slowly and with infinite pains) we're learning what we're doing. . .
Disclosure: I have a financial interest in Bayer stock - I have no exposure to Onyx (damn it all) or Xoma.
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