Is the pullback in Biotechnology sector an opportunity?

Written by: Ankit Desai (@ankitdesai6)

The year 2012 has been great for the Biotechnology sector. The NASDAQ Biotech Index (NBI) has advanced 31.0% since the beginning of the year, clearly outperforming the broader S&P 500, which has so far gained 12%. In year 2012, large and small biotech companies have launched a number of novel new products and released promising clinical data for drugs in late stage clinical pipeline. After the impressive 31% gain on the index, a healthy pullback in my opinion is warranted. After spending more than 5 years in stock market and 3+ years in biotechnology sector, I have seen that a healthy pullback after stellar upside is very healthy.

In month of October 2012, we have seen a tremendous pullback in small cap biotechnology stocks with pending regulatory catalysts. Several small-cap biotechnology/pharmaceutical companies that I follow or have invested in have seen -10% to -20% declines in month of October 2012. Not only biotechs, Apple Inc. lost 8 percent from the start of the quarter; Google Inc. fell nearly 10 percent; and upscale fast food restaurant Chipotle Mexican Grill fell 25.6 percent to a 20-month low

Will this be an opportunity for traders or small term investor to take a position into their pending regulatory catalyst? I believe so.

Zogenix ($ZGNX)

• Possible FDA Advisory Meeting in December 2012
• PDUFA on March 1, 2013

Alexza Pharmaceutical,

• PDUFA date on December 21, 2012

Vanda Pharmaceutical

• Two Phase 3 trial results to be announced in 1^st Q of 2013
• Reply to CHMP in October 2012 and expected European approval November 2012

Dynavax Technologies

• The FDA advisory panel on November 15, 2012
• PDUFA date on February 24, 2013 under standard 10-month review

EXACT Science Corporations

• Pivotal study expected late Q4 of 2012

With a healthy pullback in month of October 2012, I will be looking to add position or add more to the existing position in the companies mentioned above. 

Disclosure: Long ZGNX, VNDA. May initiate long position in $ALXA, $DVAX, $EXAS in next 72hours

Resources: Reuters, Bloomberg, FDA, Google Finance Charts