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Biotech stocks have been gaining momentum in recent weeks. Either as a generally defensive play or in specific names with drug trial success or pandemic treatment potential, there are clear opportunities for incredible returns. Dendreon (DNDN), for example, has exploded from near $4/share earlier this month to hold just above $20 on a breakthrough for its Provenge cancer treatment. Today, Novavax (NVAX), a developer of vaccines for viruses such as bird flu, rose as much as 140% on swine flu fears. However, not all biotech stocks are the same. While many have shown strength, others, such as Anadys Pharmaceuticals (ANDS) have weakened.
Thursday’s chart of ANDS demonstrates that weakness after the company released disappointing data on its hepatitis C drug, ANA598. ANDS shares have seen a mild bounce on Friday and into today’s trading, but it’s clear that the market was pricing in significant revenues from ANA598. The fall of the relative strength index to near 20 and divergence from the fifty day moving average further demonstrate a new downtrend for the stock.
Longer term charts indicate that the bull run in ANDS shares is likely over and the stock should trend back into its $1.50-$2.50 range that it held for most of 2008. The fundamentals reinforce the headwinds that the company is facing. Anadys’s last filing on April 23rd showed cash and equivalents of $20.8M, which, given operating expenses of between eight and nine million dollars a quarter, isn’t enough to keep the company operating through calendar 2009. The path through the end of the year for ANDS shares may be just as difficult.
