Dateline: 03/23/00
Amidst a stock market engulfed in euphoria over e-commerce, wireless and new media, another technology sector has lit up Wall Street with far less fanfare. Biotechnology - once relegated to the doghouse of many an investor - has resurfaced in the new millenium. Many of its leading Nasdaq issues have roared out of the gates since January, making many health-aware investors very happy indeed.
Mind you, last week's biotech sell-off was a sure sign that some health stocks had run up too quickly, thanks to a combination of hype, hope, daytrading and devil-may-care investing. But the fallback for the sector may be a buying opportunity for those long-term investors who want to get into the game at a fair price.
Some of the sector's brightest lights - such as QLT Phototherapeutics and BioChem Pharma - have emigrated to the Nasdaq from the Great White North. Those high-flyers have left many investors in the United States and elsewhere wondering what other biotech wonders may yet arise from Canada.
The truth is, the country has evolved into a hot-bed for biotechnology companies, thanks to a fertile infrastructure of tightly interwoven universities, research facilities, private sector outfits and deep-pocketed venture capitalists.
Canada has long enjoyed an international stature in many medical research areas. Now investors can tap into that value being created by the commercialization of various drugs and treatments.
Relative to the competition in the United States, many of these drugs are in the latter stages of development. An astute investor will find a number of companies with treatments undergoing or getting ready for Phase III clinical trials.
The Toronto Stock Exchange's biotech & pharmaceutical index has soared since January, led by a number of strong performers. These include Biomira, Biovail, Hemosol and Vasogen. The latter, which researches drugs that treat heart disease, is up well over 100 percent on the year.
Hemosol, a developer of artificial blood, has also blown past the 100 percent mark since January. The company is in the process of marketing a family of haemoglobin-based oxygen carriers, which in effect, would improve the oxygen-carrying capacity of a patient's blood. Some analysts believe its product is superior to that of its biggest American competitor, Biopure, which has a substantially larger market capitalization.
Another firm, Ontario-based NPS Allelix, is also riding the biotech wave. The company recently merged with U.S.-based NPS Pharmaceuticals, which develops products focusing on protein therapeutics and neuroscience. One of their products due to go to phase III trials this summer is a treatment for problems related to kidney failure.
Toronto-based Draxis Health is also enjoying a stellar Year 2000. Investors have warmed to the company's growing portfolio of drugs, which includes a recently-released product called Diastat, which treats epilepsy.
Earlier this month, several Canadian high-flying junior biotechs were propelled to new heights, thanks in part to the sudden influx of American daytraders.A number of companies hit 52-week highs, including TM Bioscience, AltaRex., Altachem Pharma and Xillix Technologies.
And then there's the story of Lorus Therapeutics. Last November, the company was trading in the 30 cents range. The stock recently peaked at $8.80 a share - before settling into a $6 range, thanks to last week's correction. The markets are buzzing over the potential of Lorus's two anti-cancer drugs, GTI-2040 and GTI-2501. The treatments have reportedly eliminated some human tumours when used alone or in conjunction with chemotherapy in early studies.
According to Dr. Jim Wright, president and chief scientific officer at Lorus, the pre-clinical results are encouraging. "Prostate cancer is one of the most common cancers in North America with, for example, nearly 900,000 new cases in the United States over the last four years," he said. "It may be treated successfully by surgery, radiation or hormonal therapies, but if the disease progresses to an advanced stage or recurs there are very few therapeutic options available.''
If Lorus can indeed fill that void, the company could be able to live up to its investors' sky-high expectations.
An optical solutions up-and-comer with its sights on the contact lens industry is UltraVision. The Calgary-based firm develops and markets specialty contact lens products. Through a number of high-profile partnerships, alliances and acquisitions across the globe, the company is slowly developing a worldwide franchise.
Another compelling story is that of Systems Xcellence, which has a 52-week range of 1 to 4 dollars. The company provides advanced online transaction systems for the health-care benefits industry.
And if you've got a hankering for the futuristic biotech sector of genomics (which comes complete with wild stock fluctuations and the watchful eyes of Bill Clinton and Tony Blair), the north country is a great place for investors once again. Shares of genomics firm Signalgene have shot up over 400 percent since the new year. Toronto-based Visible Genetics, which is working on a genetic-based treatment for AIDS, watched its stock rocket this past winter as well. Shares, which have a 52-week low of about 9 dollars, have traded as high as $119 in recent times.
For those who want to invest in a basket of Canadian biotech stocks without getting bogged down in research and ticker talk, a good option comes in the way of the mutual fund. Several funds invest in the aforementioned biotech stocks, including the many science, technology and biotechnology sector funds out there. Two in particular with a strong focus on Canadian biotech are the Canadian Medical Discovery Fund and the Navigator Canadian Technology Fund. The Canadian Medical Discovery Fund - which refers to itself as an actively managed fund at the forefront of medical research - is already up 50 percent for the past six months.
The Navigator Canadian Technology fund, meanwhile, is heavily weighted in a number of Canadian biotech companies -- although a good part of its portfolio is also in traditional high-tech plays. For investors who want exposure to all technology sectors north of the border, this fund is a great starting point. And besides, it's up well over 100 percent for the past year.
The excitement surrounding Canadian biotechs is catchy, and it's part of the reason why folks from the United States, Asia and Europe are starting to give the sector a long, hard look. For investors with a stomach for volatility and an eye for the next breakthrough treatment or drug, this IS the industry to be in. Since the new year, biotechs have roared out of the gate, and despite a few hiccups along the way, appear to be a solid long-term bet in the new economy. And to think, we're only in March.
Derek Moscato is a freelance writer whose work has appeared at TheStreet.com, Stockscape (where he edits the free weekly Stockscape Dispatcher newsletter), Viavid, Cassandras Revenge, The Vancouver Sun and others.
There are a number of Canadian bio-tech companies mentioned in Derek's article and they are all linked in a new stock chart I created - Canadian Biotech Stocks. Be sure to visit my Biotech Net Links for more!
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