Biotech lags Pharma stocks in first half of 2007

Biotech lags Pharma stocks in first half of 2007

The first half of 2007 has been a tough one for biotech stocks. Though biotech usually outpaces Big Pharma when it comes to stock growth, this year the trend has been reversed. According to CNNMoney, Pharma stocks have risen 4.6 percent year-to-date while biotechs have fallen 1.2 percent. This is of note since biotech stocks have consistently outpaced pharma stocks over the last several years.

Analysts attribute the switch to problems at two of the biotech industry's biggest players--Amgen and Genentech. Amgen's stocks have plummeted 19 percent so far this year on concerns that Amgen's anemia drugs--Epogen and Aranesp--could be linked to serious heart problems. Earlier this year the FDA toughened the warnings on these drugs. [1] In addition, Medicare regulators have proposed limiting the amount of anemia drugs that program will reimburse for [2]. Medicare spends more money on anemia drugs than for any other pharmaceutical and anemia drugs bring in a large chunk of Amgen's annual profits.

Genentech, meanwhile, seems to be having difficulty living up to its own reputation. Last year the biotech enjoyed great success with a number of drugs, including Lucentis [3], Avastin [4], Rituxan [5] and Herceptin [6]. These drugs contributed to an astounding 70 percent rise in revenue in 2006. But now the biotech is struggling to fill its pipeline with the next generation of blockbusters, and analysts doubt Genentech can keep up with the blistering growth of 2006. Just last week the company attempted to assure analysts that it was still going strong, outlining plans to have 20 different drug development programs in place by 2008, with 50 different projects underway that would include plans to expand the use of drugs already approved for marketing.

Though biotech may have flagged a bit in the first half, Big Pharma isn't without its own problems, as the industry's stock increase of 4.6 percent lags compared to the S&P 500. But pharmaceutical giants like Merck, Schering-Plough and Bristol-Meyers Squibb all posted impressive gains in the first half.

- see the CNNMoney article [7] for more

Related Articles:

Major challenges loom for Amgen. Report [8]

Amgen in crisis? Not us, says CEO Sharer. Report [9]

Amgen stock slips as anemia drug concerns rise. Report [10]

Genentech touts pipeline prospects as doubts fester. Report [11]

Genentech fights to keep edge in drug development. Report [12]

Genentech hiring researchers in big R&D push. Report [13]