Shares of Telik are plunging today, after its leading cancer drug failed late stage trials. CNBC'S Pharmaceuticals Reporter, Mike Huckman had more on the hazards of investing in biotech on "Power Lunch."
Huckman says that in biotech it can be boom or bust if you're going to invest in the volatile sector and that there should be an assumed risk of caveat emptor--a real "buyer beware."
Huckman says the latest example of that came Tuesday--when Telik announced its experimental cancer drug did not meet its goal in phase three clinical trials. Phase three is typically the last stage of testing before a company applies for and potentially wins FDA approval of a product. Telik fell 70% on the news.
But Telik has lots of company in the biotech basement according to Huckman; joining the ranks of Nuvelo and Northfield just to name a couple whose stocks also tanked recently on bad test results.
And of course the exact opposite can happen when for example companies like GPC Biotechand Pharmion, partners on a prostate cancer drug come out with gangbuster results.
Huckman says that sometimes, Biotech upside doesn't come from the clinic but from the cash box. Investors in SirnaTherapeuticswoke up to the news recently that a big drug company, in this case Merck, is going to pay two times the stock price to buy the firm.
While that kind of premium is extraordinary--the trend of buying and partnering with biotechs is expected to continue next year.
According to Huckman--there are a few biotechs that could that could hit milestones in the new year: Medarexand its partner Bristol Myers Squibb are expected to have late stage test results and to possibly file for approval of a skin cancer drug.
Others include: Dendreon's which is waiting for an FDA decision on its prostate cancer treatment: Allos Therapeutics which could have phase three data on its brain tumor radiation-related drug: Sonus which is expected to show results on a breast cancer fighter. And Neurochem which could report late stage clinical trial results on its alzheimer's drug.
Despite all the recent push and pull in the sector, the AMEX Biotech Index has performed twice as well as the S&P 500 so far this quarter.