Monday, May 18, 2009

Biotechs getting some run

With health conference season in full swing, biotechs are showing green on a daily basis. In between rubber chicken luncheons, CEO's are pitching their companies on the next game-changing treatment for various human ills through endless PowerPoint presentations. Many will fail to live up to their promise, but a few will actually make it through the FDA approval--estimates are 1 in 5 succeed.

The DNDN effect is providing even biotech penny stocks new life, as no one wants to miss out on the next blockbuster. Some companies have also had impressive price appreciation, including VNDA, who received a surprise FDA approval, despite a rejection last year. Partnership and buyout rumors are floating around these conferences, with big pharmas looking to replenish their drug portfolios, as their pipelines dry up due to patent expiration. This effect is driving up premiums for clinical-stage, microcap biotech companies, whose share prices were decimated by the credit crunch and financial crisis last year.

Let's hope the overall market doesn't take away the punch bowl.

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