The following ten securities will be added to the Index: Cerus Corporation (Nasdaq: CERS), Celldex Therapeutics, Inc. (Nasdaq: CLDX), Amicus Therapeutics, Inc.(Nasdaq: FOLD), Infinity Pharmaceuticals, Inc. (Nasdaq: INFI), Jazz Pharmaceuticals plc (Nasdaq: JAZZ), Omeros Corporation (Nasdaq: OMER), Orexigen Therapeutics, Inc. (Nasdaq: OREX), Pacira Pharmaceuticals, Inc. (Nasdaq: PCRX), Raptor Pharmaceutical Corporation (Nasdaq: RPTP), and Trius Therapeutics, Inc. (Nasdaq: TSRX).

The following members will be booted from the NASDAQ Biotechnology Index: BioSante Pharmaceuticals, Inc. (Nasdaq: BPAX), China Biologic Products, Inc. (Nasdaq: CBPO), Columbia Laboratories, Inc. (Nasdaq: CBRX), Cardiome Pharma Corp (Nasdaq: CRME) and DURECT Corporation (Nasdaq: DRRX).

The NASDAQ Biotechnology Index tracks the performance of a set of NASDAQ-listed securities that are classified as either biotechnology or pharmaceutical and it is re-ranked twice a year (May/November).

The iShares Nasdaq Biotechnology (NASDAQ: IBB) ETF has more than $1.8 billion in assets and it aims to track the NASDAQ Biotechnology Index per its description.  SPDR S&P Biotech (AMEX: XBI) has more than $500 million in assets tracks the biotech members ranked by S&P, but there are some overlaps in the indexes. Market Vectors Biotech ETF (AMEX: BBH) has only just over $100 million in assets and tracks the  Market Vectors US Listed Biotech 25 Index.

JON C. OGG

It appears as though Wall Street favors Gilead Sciences, Inc. (NASDAQ: GILD) in the large cap biotech stocks over its peers with more than 18% implied upside.  Other smaller mid-cap biotechs with a high degree of expected upside were Amylin Pharmaceuticals, Inc. (NASDAQ: AMLN) of 32%, ARIAD Pharmaceuticals, Inc. (NASDAQ: ARIA) of 50%, and Incyte Corporation (NASDAQ: INCY) of over 60%.

Here is the full report on expected upside on these and more than a dozen other large-cap and mid-cap biotech stocks.

Human Genome Sciences, Inc. (NASDAQ: HGSI) is up again, a day after buyout rumors have circulated for nearly a 100% premium.  We would caution that analysts still have close to the same price target on their own as the reported buyout price target.

Dendreon Corporation (NASDAQ: DNDN) is also still trying to get past its implosion after disappointing Provenge sales.  It has even gone as far as cutting its headcount.  Analysts still see big upside of well above 40% but the entire analyst bias is now very cautious.

Incyte Corporation (NASDAQ: INCY) had a very rough July to August period and that analyst upside may be phantom upside that has not yet adjusted for the price drops of the recent past.  We have an early December decision date from the FDA for its myelofibrosis treatment.

As far as how these all compares to the key ETFs, the following should be considered:

iShares Nasdaq Biotechnology (NASDAQ: IBB) up 0.5% at $96.50 and the 52-week range is $83.96 to $110.02. Total assets under management are approximately $1.26 billion.

SPDR S&P Biotech (NYSE: XBI) up 0.5% at $63.79 and the 52-week range is $54.71 to $75.86. Total assets under management are approximately $500 million.

Biotech HOLDRs (NYSE: BBH) are up 0.2% on extremely thin volume and the 52-week range is $88.01 to $114.92.  Total assets under management are approximately $240 million.

JON C. OGG

Biotech HOLDRs (NYSE: BBH) is the oldest biotech ETF and its shares hit a multi-year high of $107.75 today.  That is up more than 25% from the lows of last summer.  Amgen Inc. (NASDAQ: AMGN), Gilead Sciences, Inc. (NASDAQ: GILD), and Biogen Idec Inc. (NASDAQ: BIIB) now equate to right at 85% of the entire Biotech HOLDRs.  Genentech and Genzyme are now not there to counterbalance the ETF with large weightings.

SPDR S&P Biotech ETF (NYSE: XBI) avoids this as it has more companies in the underlying ETF but it too runs the risk that many of the mid-cap constituents are being acquired.  This one has not hit a year-high today, but its shares are up more than 35% from the lows of last summer.

First Trust NYSE Arca Biotechnology Index Fund (NYSE: FBT) has a more diversified holdings base as well, but its weighting is over 6% in Celera Corporation (NYSE: CRA) (already in a deal) and just under 6% in Cephalon Inc. (NASDAQ: CEPH) with a status pending on whether or it stays independent or merges.  Soo far it has yet to take out a 52-week high but even by a closer margin than the “XBI” above.  This one is up nearly 40% from the lows of last summer.

iShares NASDAQ Biotechnology (NASDAQ: IBB) also came well within 1% of a 52-week high yet again today, with its shares up about 35% of last summer’s lows.  If you are looking for a biotech ETF with the least disruptive impact by the M&A waves in the sector this one (at least currently) appears to be the least dented by M&A.  That may change but that is noted solely ‘just in case.’

Obviously not every single biotech will be acquired.  That is not the point.  What is important to watch is how the continued trend of mergers is changing the weighting of each of these ETFs.  If these weightings change too much it can impact how each of these trade.

JON C. OGG

These new securities will not be a true IPO but the value of these will possibly fluctuate wildly around news compared to how Genzyme shares used to trade on their own.  Sanofi-Aventis has commenced its exchange offer for Genzyme shares for $74.00 cash and one CVR per share.

The CVRs give former Genzyme holders and new CVR buyers the right to receive additional cash payments if specified milestones related to Lemtrada are achieved over time or a milestone related to production volumes in 2011 for Cerezyme and Fabrazyme is achieved.

Upon closing of the exchange offer, the CVRs will be listed on the Nasdaq market under the ticker symbol “GCVRZ”.  These will trade in short order as the exchange offer to acquire Genzyme currently expires at 11:59 p.m., New York City time, on April 1, 2011.

Genzyme used to trade with tracking stocks before the company reacquired the entities.  Now Genzyme is being acquired by Sanofi-Aventis.  Determining the ultimate value of each CVR will be no easy task, but the value around NOON EST today would have been about $2.03 per CVR if you deduct $74.00 from $76.03.

The Genzyme acquisition is going to have some reallocation ramifications in biotech indexes and ETFs.  The Biotech HOLDRS (NYSE: BBH) have Genzyme as being 10.16% of its fund holdings. iShares Nasdaq Biotechnology (NASDAQ: IBB) has only a 3.24% weighting and First Trust NYSE Arca Biotechnology Index Fund (NYSE: FBT) has a 5.22% weighting for Genzyme.

Investors will still get to trade Genzyme via a new security, but these are not shares.  They are rights, and the ultimate value could be as mush as $14.00 per share through time if all hurdles are met or exceeded.

JON C. OGG

Predicting markets and economic patterns is difficult over the next 20 years because there are many unknowns.  After all, who will be President in 2016?  What will tax laws be in 2020?  Which of today’s deadly diseases will be cured in 2020?  Which regions will experience wars by 2020?  This is why futurism may be one of the more unique approaches in investing. ETFs are often called the mutual funds of the future and our goal is to meld a futurist outlook into an investing strategies.

A rule of long-term investing is that what investments feel good today, such as those in Chinese and Indian markets, may not generate returns tomorrow.  Investors will face short-term pain for long-term gain. Futurists are always thinking beyond the next recession and the next boom behind it.

Beyond Emerging Markets… Frontier Markets

If you are thinking about China or India over the next 10 to 20 years, there is plenty to consider.  Both countries have grown exponentially as they became some of the world’s largest economies. Think post-Chindia and post-BRIC.  ”Frontier markets,” a term which has come up in recent years that goes beyond ‘emerging markets’ is ‘frontier markets.’  These “frontier market” economies still have room for growth.  Perhaps nothing illustrates this better than The NatGeo World Map at Night.

When it come to Africa and other Frontier Markets, there are three exchange-listed vehicles that we usually choose.  All are generally more volatile than the broader market stock indexes in the developed world.  Many frontier funds base performance  off of the MSCI Emerging Markets Index rather than the S&P 500.

Morgan Stanley Frontier Emerging Market Funds, Inc. (NYSE: FFD) is a small closed-end fund with roughly $105 million in assets.  This fund has diverse investments in banks, breweries, miners and utilities.  At its semi-annual report, the fund listed holdings in 21 nations including Nigeria, Argentina, Bangladesh, U.A.E., Kenya, Kuwait, Pakistan, Serbia, Qatar, Lebanon and Greece.  Average volume is light at just under 20,000 shares in a day and its 52-week range is $10.52 to $15.23.

Market Vectors Africa Index ETF (NYSE: AFK) from Van Eck seeks to track the performance of the Dow Jones Africa Titans 50 Index, which is full of companies that are headquartered in Africa or that generate the majority of their revenues in Africa.  It holds banks, breweries, miners, utilities, and more.  South Africa is where the largest number of the fund’s holdings are based. Assets under management were listed as $92 million in mid-November, its 52-week trading range is $26.60 to $34.88, and average daily volume is close to 25,000 shares per day.

iShares MSCI South Africa Index (NYSE: EZA) is an ETF that seeks to track the MSCI South Africa Index and it is one of the largest  vehicles out there since South Africa has a more established markets and is more politically stable compared with other African nations.  The fund invests in South African companies and has roughly $520 million in assets.  It trades close to 400,000 shares a day, and its 52-week range is in the low-$50s to $72.77 (flash crash low was listed as $23.00).  Its holdings include Anglo Platinum, AngloGold Ashanti, Firstrand, Gold Fields Ltd., Sasol, and Standard Bank.

Is Africa risky?  Are many other nations in the Frontiers markets risky? Absolutely.  But many of these nations have some of the biggest undisturbed deposits of natural resources.  That’s why we have highlighted these ETF and fund products rather than make individual picks.

Are You Ready For The International Water Wars?

Americans, Canadians, and many Europeans take potable water for granted.  However, Montezuma’s Revenge and many water-borne illnesses are rather common around the globe.  Building water filtration systems and desalination plants is costly. Nations are already setting limits on water resources.  Don’t ever discount the future of water.  Wars could be fought over potable water sources.  If you refer to that Nat-Geo World at Night Map, you can guess where much of the water resources are needed.

Many speculators have invested in the water industry for years.  It is no wonder that GE, 3M, and many other conglomerates have invested in the sector.  PowerShares Global Water (NYSE: PIO) and PowerShares Water Resources (NYSE: PHO) are two ETFs that compete in the world of water investing.

The PowerShares Water Resources (NYSE: PHO) seeks to track the Palisades Water index and it tends to have more of a U.S. focus.  Of course, many of these companies were hurt because they built new infrastructure ahead of housing developments that were scraped when the bubble burst.  PowerShares Water U.S. assets are close to $1 billion. It trades well over 200,000 shares per day, and its 52-week range is $14.70 to $18.68. (outside flash crash listed low of $6.99) to $18.68.

The PowerShares Global Water (NYSE: PIO) seeks to track the Palisades Global Water index, and it invests in U.S. companies and large international companies.  This is a smaller fund than the domestic water fund (PHO) from PowerShares.  Still,  it has more than $300 million in assets and trades close to 60,000 shares per day, and it has a 52-week range of $15.60 to $19.46.

J.P. Morgan Asset Management and Water Asset Management acquired Southwest Water, and that Water Asset Management is a private investment vehicle.  These are four small water mutual funds: Kinetics Water Infrastructure Advantaged Fund (KWIAX), PFW Water Fund (PFWAX), Allianz RCM Global Water Fund (AWTAX), and Calvert Global Water Fund (CFWAX).

NANO-NANO… Take Me To Your InnerSpace

The word nanotechnology, or nanotech for short, is another futurist technology. Many aspects of nanotechnology are already in use today in chemicals and other products.  This may also be one of the most controversial issues in the world of technology.  Think about atomic and molecular scale systems comprised of compounds between 1 to 100 nanometers, or one billionth of a meter.  There have been fortunes made by investors and there have been many fortunes lost.

Imagine machines so small that they could operate and move freely in your blood.  Imagine coatings that are comprised of molecules and materials small enough that they get a perfectly flat surface.  Unfortunately, you also have to consider toxicity, regulation, and the potential for a destructive use for such small products.  There is one ETF in the PowerShares Lux Nanotech (NYSE: PXN).

The PowerShares Lux Nanotech (NYSE: PXN) from Invesco seeks to track the the Lux Nanotech index.  It is comprised of some well-known companies and many companies have nanotech as a portion of their business.  The ETF has been around since the end of 2005 and has never recaptured its former highs.  It is also small at about $6 million in assets and trades under 25,000 shares a day on average.  Its 52-week range is $7.74 to $10.85.  Some of the companies in the fund include A123 Systems, Elan, 3M, GE, and Headwaters; but this ETF has some very risky and very volatile holdings as well.

Harris & Harris Group, Inc. (NASDAQ: TINY) is a nanotech venture capital fund whose website address tinytechvc.com tells what it is all about.  Its market capitalization is roughly $137 million, it trades close to 100,000 shares per day, and its 52-week range is $3.70 to $5.50.  While this is not a fund, it is close enough as the VC-company’s portfolio has more than 30 investment company holdings.  The company claimed a net asset value of $4.51 per share as of September 30, 2010, but founder Charles Harris also passed away at the end of September 2010.

Advanced Batteries… High on Lithium

All of those rechargeable batteries, batteries in consumer electronics and electric cars need lithium, which makes it a trend for futurists to consider.  There are two key risks here for this precious commodity: it could eventually run out or become uneconomical.  Moreover, China and Russia are major suppliers, which gives the sector an element of political instability.

Is it possible a better technology could come along?  Of course.  Still, there are many opportunities in the industry and it is probably no accident that behemoths such as General Electric have already invested in advanced batteries and have vowed to continue to do so. Lithium demand has nearly doubled in the past decade from above 15,000 metric tons in 2002 and is expected to rise to 55,000 metric tons by 2020 , according to the TRU Group.

Global X Lithium ETF (NYSE: LIT) is a very new ETF that launched in the summer and its holdings are solely in companies active in exploring and mining of lithium and producing lithium batteries.  So far it has been a big success.  The fund seeks to track the Solactive Global Lithium Index. Some key holdings are Sociedad Quimica Y Minera De Chile (above 22% of the fund), FMC Corp., Rockwood Holdings, Sanyo Electric, Ener1 and A123 Systems.  Assets under management are $91.5 million, it trades over 100,000 shares on an average day, in a range of $15.63 to $21.30.
Alternative Energy, In A Broader Sense

Investing in alternative energy may hold the promise of the future.  It has also been very painful even for futurists with a decade or longer outlook.  True futurists may seek an answer out of wind, solar, wave, geothermal, biofuels and even nuclear energy.  Not all alternative energy is technically renewable.  But the world needs alternative energy sources.  That is no longer even debated in public by most oil executives.

A problem that arises even for futurists with a ten-year outlook or longer is that the oil and gas giants of today may be the leaders of alternative energy in the future.  BP plc (NYSE: BP) has one of the worlds largest solar operations, and it is not unchallenged by other oil and gas giants.  Another caveat is that you do not need to be a futurist to see how many alternative energy and renewable energy investments are often considered nothing more than highly leveraged bets against the future price of oil.

PowerShares WilderHill Clean Energy (NYSE: PBW) is one of the go-to ETF products in alternative energy.  The fund is meant to track the performance of the WilderHill Clean Energy index.  Its largest holdings do seem to be more geared toward solar, which is most established alternative energy technology.  Some of its key components are First Solar, Broadwind Energy, IDACORP, JA Solar, and Suntech Power.  The fund has more than $550 million in assets, it trades over 300,000 shares per day, and its 52-week range is roughly $8.25 to $11.95.  The biggest issue is performance as it was worth over $25 at the 2008 peak versus close to $10.00 currently.

PowerShares Cleantech (NYSE: PZD) is the international and smaller competing version of the PowerShares Wilderhill Clean Energy ETF.  It is meant to track the price and yield performance of the Cleantech index.  Some of its top holdings are ABB, Corning, First Solar, IBERDROLA, Novozymes, Siemens, and Vestas Wind Systems.  Assets are about $150 million, it trades only about 14,000 shares a day and its 52-week range is $20.00 to $25.95.  This too suffers from poor performance as its shares were above $35.00 in the 2008 peak versus under $25 today.

An even more international focus in clean energy is the PowerShares Global Clean Energy (NYSE: PBD).  Its focus is to track the performance of the WilderHill New Energy Global Innovation index and many more companies are global.  Most of its larger constituent members are not known to most US investors.  The market cap is fairly small at about $160 million, it trades about 40,000 shares a day, and its 52-week range is $11.51 to $17.64.  It is far from alone in performance anxiety as this was above $30 at the peak and it is closer to $13.00 in November-2010.

Rare Earth… Not So Rare, But….

Any investors thinking of investing in rare earth should consider what happened in 2010 before putting on a futurist’s hat and taking a shot.   All caveats aside, nations such as the United States have to depend upon foreign sources of rare earth materials and these are critical for defense equipment  autos, clean energy, electronics and medical devices.  It is vital that these REOs and REEs have a local source and it is vital that we have our own sources.  The risks in investing in this might be like comparing biotech to DJIA components.  Futurists down the road will likely concede that many of the companies in this field were little more than Hail Mary passes with a story rather than real assets that could be monetized economically.

The Market Vectors Rare Earth/Strategic Metals ETF (NYSE: REMX) is the only current fund-oriented instrument that revolves around the REE and REO trade.  It is extremely new, its methodology is unproven, and its company constituents are often very risky companies with promises rather than operating histories.  The launch came at the end of October-2008 and it has been very actively traded.  For 2010, we are going to not discuss price ranges, performance, and more because of all the risks here.  Either way and regardless of how this performs, the rare earth theme is unlikely a theme that purchasing managers will not have to consider for the future.

Back to futurists and secular themes in general…

If you want to learn more about futurist thoughts and ideas, one source I have used for some time is the World Future Society.  This is not an investment web site.  It has offered insight for futurists and those who think beyond the next month for years and years.  It publishes The Futurist magazine, has free email newsletters, conferences, books, blogs, and links to many local chapters throughout the U.S. and around the world.

Predicting markets and sectors is a tricky game, and most forecasting models have a hard enough time getting the next week or month accurate.  Modeling for a decade or a generation is that much harder.

JON C.  OGG

Those issues covered are Celgene Corporation (NASDAQ: CELG), Gilead Sciences Inc. (NASDAQ: GILD), Amgen Inc. (NASDAQ: AMGN), Biogen Idec Inc. (NASDAQ: BIIB), Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN), MannKind Corp. (NASDAQ: MNKD), Human Genome Sciences Inc. (NASDAQ: HGSI), VIVUS Inc. (NASDAQ: VVUS), and Dendreon Corporation (NASDAQ: DNDN)… most of which were flops this last week while the NASDAQ and the broader stocks performed well.  We also compared the Biotech HOLDRs (NYSE: BBH) and SPDR S&P Biotech (NYSE: XBI) to the PowerShares QQQ (NASDAQ: QQQQ) to highlight some of the underperformance.

Read the full report at BioHealthInvestor.com

We have tried to smooth out the non-news movers today to mainly focus on those moving on their own news rather than on news of peers.

Antigenics Inc. (NASDAQ: AGEN) is up today on an article out yesterday from Cleveland Live, although it was out yesterday morning so there could be additional chats out there.  Still, for a down-sector tape this one is solid with gains so far of 3.4% at $1.21 on over 3 million shares.  The 52-week range is $0.51 to $3.34 and the average volume is 1.2 million shares.

Array BioPharma, Inc. (NASDAQ: ARRY) is holding up very well after yesterday’s huge drug partnership gains. After a 33% gain yesterday, the stock is down “only” 4% at $3.86 on 1.8 million shares.

Genzyme Corporation (NASDAQ: GENZ) is up after earnings with $0.37 EPS on a 6% drop in revenues to $1.07 billion versus estimates of $0.33 EPS and $1.14 billion in revenues.  Perhaps more importantly, Genzyme sees a $175 million consent decree disgorgement for its Allston plant woes.  That sounds bad, but some have felt that the Allston plant fines, woes, and remedies might cost much more than that.  Shares are up 1.75% at $54.53 on about 5.3 million shares.

Gilead Sciences, Inc. (NASDAQ: GILD) is down sharply after its earnings were $0.99 EPS vs. $0.96 estimates and revenue rose 36% to $2.09 billion, but it lowered its 2010 sales outlook partly due to healthcare reform.  This has put a tilt on the whole sector today and probably kept a lid on some stocks which might have otherwise risen as this is the #2 biotech by market cap in America.  Shares are down a sharp 9.75% at $40.66 on over 57 million shares.  Gilead hit a new 52-week today now that its 52-week range is $39.90 to $50.00.

Human Genome Sciences, Inc. (NASDAQ: HGSI) is again probably feeling lucky.  Yesterday’s near-$2 drop could have been far worse after its Benlysta secondary endpoint was not met.  Today, shares are trading down only 0.4% at $29.48 and the $29.28 low today is handily above the low yesterday of $27.72.

NPS Pharmaceuticals, Inc. (NASDAQ: NPSP) is down marginally after it closed that securities offering $53.3 million, which does include the over-allotment options being exercised.  Shares are trading down 1.4% at $6.39 on 650,000 shares.

QLT Inc. (NASDAQ: QLTI) is up again for a day-two run after yesterday’s news that all three of the patients enrolled in a Phase 1 study experienced clinically relevant improvements in one or more visual function parameters in inherited progressive retinal degenerative disease.  This actually hit a new 52-week high today.  Shares are trading up 4.7% at $6.45 on over 225,000 shares.  Average volume is only 155,000 shares and the new 52-week range is $1.93 to $6.48.

Raptor Pharmaceuticals Corp. (NASDAQ: RPTP) is one which you might think is never talked about, but this stock was started in new analyst coverage with a ‘Buy’ rating at Ladenberg Thalmann.  Even after the gains, the market cap is a mere $37 million. This one is seeking cures and treatments for various brain disorders and neurodegenerative diseases, genetic disorders, and cancer with its own proprietary use of receptor-associated proteins and mesoderm development proteins.  Shares are up 17.7% at $1.66 on about 900,000 shares. This barely trades 50,000 on an average day and the 52-week trading range is $0.07 to $4.90.

StemCells, Inc. (NASDAQ: STEM) sounded like big news, although the stock reaction is not indicating that it is.  The company announced this morning that it plans to advance to a second clinical trial in Batten Disease with an increased emphasis on the measurement of clinical benefit rather than just a safety profile.  Shares are up almost 1% at $1.18 on 1.4 million shares.  The average volume is only 1.3 million shares and the 52-week range is $1.02 to $1.94.

Biotech HOLDRs (NYSE: BBH) appears to have tested its 200-day moving averages after Gilead reported, and Gilead makes up almost 28% of this ETF.  The Biotech HOLDRs is trading down 4.15% at $98.45.  The iShares Nasdaq Biotechnology (NASDAQ: IBB) ETF is down 2% at $90.35 on over 1.5 million shares, about 250% of normal volume.

PowerShares Dynamic Biotech & Genome (NYSE: PBE) is down today, but it continues to challenge the brain at a time when so many components in its holdings are not at highs. This hit a 52-week of $20.06 early this morning, but shares are now trading down about 1% at $19.83 on only about 26,000 shares.  This one keeps mysteriously hitting 52-week highs.

You can join our free daily email distribution list to hear more about dividend trends, analyst upgrades and downgrades, top day trader and active trader alerts, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

New short-interest data suggest traders are now increasing their directional bets against biotech stocks. Pfizer Inc. (NYSE: PFE) and Merck & Co. (NYSE: MRK) are in the top 10 of all large-cap stocks with the greatest increase in the number of shares shorted.

Eli Lilly has the FDA’s OK to market its Effient blood thinner, but the black-box warning on its label is so strong that it’s hard to believe it can dent the market share of the Sanofi Aventis (NYSE: SNY)/ Bristol Myers Inc. (NYSE: BMY) drug Plavix.

OSI Pharmaceuticals Inc. (Nasdaq: OSIP) announced new data from its Phase III Saturn study of Tarceva, and it’s likely an incremental positive for the cancer drug over rival Eli Lilly & Co.’s (NYSE: LLY) drug Altima.

-The 24/7 Wall St. Team

Amgen (NASDAQ: AMGN) and Wyeth (NYSE: WYE) announced that arthritis and psoriasis drug Enbrel will now have a tuberculosis warning put on the label. Amgen down $1.27 to a nearly new low of $43.19 today with a 52 week range of $43.14 to $66.06. Wyeth shows less response–up $0.34 to $39.76, with a range of $39.50 to $62.30. 

Cardiome Pharma Corp. (NASDAQ: CRME) showed positive results in interim mid-stage data for abnormal heart rhythm drug. There is also talk of selling drug off. Shares responded with a 34% rise to $8.40 today. The 52 week range is $5.78 to $12.62. 

Dendreon (NASDAQ: DNDN) slipping after analysts question success of prostate-cancer vaccine Provenge clinical trial results that are due later this year. Down over 9% to $4.29 today.

GenVec (NASDAQ: GNVC) shares are still up after earnings call Friday. The company reported smaller than estimated losses despite a drop in revenue. The company projects higher revenues in 2008. Shares are up 5% to $1.24. The 52 week range is $0.97 to $4.72.

Genetech (NYSE: DNA) is still dipping after Friday’s earnings and projections for 2008 came up short to estimates. Down 2% to $77.15 today, the stock closed at $78.83 Friday. The 52 week range is $65.35 to $85.95.

QLT Inc. (NASDAQ: QLTI) up almost 50% on an FDA removal of blood screening and monitoring requirement for its acne treatment, Aczone. The FDA decision followed recent studies that resulted in no clinical evidence that anemia is associated with use of the drug. Shares are trading at $3.61 in early afternoon trading. The 52 week range is $2.43 to $8.40.

Trubion Pharmaceuticals (NASDAQ: TBRN) mysteriously up by 6% today. Last Thursday, the company reported widened losses, however, the losses weren’t as deep as estimated by Wall Street. Shares trading at $8.33 with a 52 week range of $5.84 to $22.46.

There is no easier way for basic investors to check how a sector is doing other than the ETF’s, and the Biotech ETF’s will describe the situation today.  The Biotech HOLDRs (AMEX: BBH) are down 2.6% at $166.05 today, and the SPDR Select S&P Biotech ETF (AMEX: XBI) is down almost 4% at $48.14.

Rachel Lopez
March 17, 2008

If you were a biotech bull in 2003, 2004, and 2005 your favorite large cap biotech stock was probably Genentech (NYSE: DNA).  If you traded Genentech in 2006 and 2007, remaining a bull was one painful lesson.  In fact, shares very briefly hit $100 in December 2005 and they have recently traded as low as $65.60 this month.  Shares are down today by almost 1.5% at $70.45 but so far that $70 handle is holding.

Traditionally Genentech has remained a biotech that beats earnings expectations, although that number was only a "barely beat target" last quarter.  The problem that has persisted isn’t the actual growth as much as it is analysts and investors keying in on specific drug estimates not being a blowout on all of its labels.  Revenues were only $6.6 Billion for all of 2005.  The cancer franchise is massive there, yet there always seems to be a general disappointment in one drug or another  (Avastin, Rituxan, Herceptin, Lucentis, Xolair, Tarceva, Nutropin, Activase, Raptiva). 

What we are looking at now internally is the forward valuations, which we feel are achievable in light of the company having a multi-year plan in place.  With estimates showing Fiscal DEC-2008 at $3.37 EPS on revenues of $13 Billion, we have a forward P/E ratio of just under 21 for 2008, and a price to sales ratio (based on a $74 Billion market cap) of 5.69.  For what we believe is still the key leader in its cancer franchise with what is still believed to be a large drug candidate pipeline, we can easily live with these numbers.

Trying to use the "Value Investing" approach to biotech is not always applicable.  We’d merely point you to the woes at Amgen (NASDAQ:AMGN) and Biogen-Idec (NASDAQ:BIIB).  The forward P/E ratios and the sales multiples won’t matter at all if a blockbuster drug franchise comes under target.  While biotechs have been shielded in the past, it is open season on drugs during an election year whether you are a biotech company or just an old stodgy drug company.

We still believe that investors want to own stocks.  And as the economy slows into a recession we think investors will want to own stocks that may have implied safety nets in them.  Many of the other defensive stocks had been showing bubbly valuations just last week, and that doesn’t appear to be the case here.  Now we just have to see if the focus will turn back to the overall performance of the company as a whole.  If the focus will stay on each and every drug at the company then it’s hard to imagine that there won’t be any areas that traders can say were under their investment models.

Wall Street still has an average price target north of $82 per share over the next year and there is still a high target north of $100 out there.  The chart is still one that is at-risk longer-term, but on a short-term it has recovered.  If the street takes a disappointing reaction again we could see that going back to that $65.00 handle.  If there is some horrible unexpected news then who knows where they will find support as the year lows from December and January are roughly 30-month lows.  If options are any accurate tool today it appears that options traders are only looking at an expected price move of up to $2.50 or so in either direction.

As Genentech is the bogey in biotech now, it can affect the entire sector.  It also has partnerships with Novartis (NVS), Biogen-Idec (BIIB), OSI Pharma (OSIP), and others.  It is also still majority-owned by Roche, so the earnings implications and drug comments from Genentech can be far reaching and not just in the U.S.

Genentech is key to one ETF as it represents some 36% of the Biotech HOLDRs (AMEX:BBH). 

Jon C. Ogg
January 14, 2008