NEW YORK — The annual meeting of the nation's cancer specialists, one of the largest and most closely watched medical gatherings of the year, often gives biotechnology stocks a fillip. Not this year.
More bad news from ImClone Systems Inc., whose drug Erbitux failed in a mid-stage trial to halt or reverse the course of head and neck cancer, sent its shares tumbling $2.29, or 17%, to $11.12 on Monday.
Many other biotech stocks also slumped, renewing their sharp declines of recent months, as news from the American Society of Clinical Oncologists meeting here did little to inspire investors.
The American Stock Exchange biotechnology stock index fell 2.1% to 411.39. It has tumbled 29% this year on concern that new drugs many investors had expected to emerge from the decoding of the human genome may take much longer to materialize than some scientists had hoped. The biotech index's decline far exceeds the 13% loss this year in the Nasdaq composite index.
Biotech shares rocketed in 1999 and 2000 on surging optimism about new treatments. But "the reality is it's much more difficult than people thought," said Matt Stephani, a portfolio manager at the Idex Great Companies of America Global Fund.
More than a dozen drugs have failed clinical trials or been delayed in the regulatory approval process since January. That wave of bad news has some questioning whether the latest method of drug discovery--marrying functional genomics with mass screening techniques of drug candidates--is creating smoke but no fire.
The mapping of the genome is creating hundreds of potential disease targets against which to develop drugs. Often scientists see that a gene has an interesting function, such as lowering blood pressure, and throw compounds at it in the hope something will stick. That's too random an approach, some experts say.
"There's a difference between knowing something has biological significance and proving it has clinical significance," said Toni Schuh, chief executive of Sequenom Inc., a company that makes tools it says can help scientists pick the most promising targets.
Others say that there's nothing wrong with the approach, but that expectations have been irrationally inflated and that investors should not expect to see a raft of new products for 10 to 15 years.
"The time to develop drugs is much longer than Wall Street ever expected," said Scott Morrison, national director of life sciences at accounting firm Ernst & Young.
High-profile recent disappointments include Abgenix Inc.'s decision last week to drop development of one of its two main drugs after it failed to prove effective in treating the skin disorder psoriasis.
Also last week, Emisphere Technologies Inc. said its oral version of the blood-thinning injectable drug heparin proved less effective than an existing product.
There was one bright spot Monday: Telik Inc. reported better-than-expected results of a cancer drug trial on ovarian and lung cancer patients. Its shares rose $1.14, or 10.2%, to $12.36.
Some investors say that the decline in biotech stocks is overdone and that promising firms have been tarred with the same brush as duds.
"Clearly some of these companies didn't deserve to have been valued as high as they were, but the pendulum has now swung so far the other way it's preposterous," said Paul Abel, portfolio manager at Kinetics Medical Fund.