Thursday was an ugly day on Wall Street, and one of the hardest-hit stocks was biotech Dendreon (DNDN), which plunged a heart-stopping 67%.
The maker of the prostate cancer vaccine Provenge reported disappointing results and withdrew its sales forecast. Management's reasoning left huge question marks about its product -- questions that spooked investors and added additional selling pressure on other biotechs.
InterMune (ITMN) lost 19% of its value after an analyst from Jefferies spelled it out after downgrading the stock to underperform. The analyst fears that expectations for InterMune's lung drug, which is about to launch in Europe, are unreasonable and would trigger a Dendreon-like disaster.
Savient (SVNT) -- which also launched its gout drug, Krystexxa, at the end of last year -- also got hit hard, sinking 28%. Investors weren't impressed with the second quarter, even more than the first.
Seattle Genetics (SGEN) also skidded more than 9%, even though an FDA panel recently recommended accelerated approval of Adcetris.
And let's not forget Vertex (VRTX) and its very promising Hep C drug that was recently approved; its stock was down 8%. Can this possibly be a flop, too? Suddenly, investors who used to be cautious about early development drugs and stock are now also cautious about companies with launched drugs.
The biotech sector as a whole got clobbered. Companies big and small, with products in different stages of development, approval, or launch declined magnificently. Of course, not all companies were down simply because of Dendreon, but it's hard not to see how the sector contracted some of Dendreon's disease.
We are seeing some slight recovery today in individual companies. However, the Nasdaq Biotechnology index , which was down about 8% Thursday, declined further Friday. That said, I wouldn't recommend going on a shopping spree for any discounted biotech. However, if you've been watching one or two companies, the recent market activity has likely made for good bargain hunting.
Motley Fool contributor Melly Alazraki does not own shares in any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Vertex Pharmaceuticals.
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