Time To Take Advantage of the Slaughter in Biotech

Marc Lichtenfeld: At the J.P. Morgan Healthcare Conference in San Francisco three weeks ago, it was all rainbows and unicorns when it came to the biotech sector. At that point, the sector had climbed 50% over the previous year and 140% since the recent low in November 2011. Biotech was white-hot.


And then the conference ended and seemingly everyone sold all their shares. At least that’s the way it feels. The NYSE ARCA BIOTECH INDEX(INDEXNYSEGIS:BTK) fell 8% in less than two weeks. The smaller cap names got crushed.


In my Healthcare Profits Alert service, we got stopped out of two of our small cap names: Idenix Pharmaceuticals Inc(NASDAQ:IDIX) and Dynavax Technologies Corporation(NASDAQ:DVAX), taking profits of 52% and 21%, respectively. Subscribers who bought calls in Idenix made 150% in about a month.


Because I raised the stop as the stocks climbed higher, we exited the positions with much of our gains still intact.


Panic Sets In


The slide in emerging markets set off a panic in speculative assets in the United States, and biotech investors who were sitting on fat profits decided to take their ball and go home. It’s hard to blame them when they were sitting on huge gains like 266% in Celldex Therapeutics, Inc.(NASDAQ:CLDX) in less than a year or 198% in Galena Biopharma Inc(NASDAQ:GALE) in six months.


And it’s not just the small caps. Even most of the


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