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2012 Biotech Boom

Biotech Sector Posts Major Gains

Written by Swagato Chakravorty
Posted December 11, 2012 at 5:13PM

2012 has been a great year for the biotech sector, drawing investor attention with new approvals and innovative technology. The iShares Nasdaq Biotechnology Index Fund (NASDAQ: IBB) gained 34 percent so far this year and the SPDR S&P Biotech ETF (NYSE: XBI) gained more than 35 percent while the number of new drug approvals shot up.

A report from Five Star Equities provides outlook for the industry and equity guidance on two firms: Athersys Inc. (NASDAQ: ATHX) and Santarus Inc. (NASDAQ: SNTS).


"In 2011, the U.S. FDA approved 30 new drugs, compared to 21 in 2010," S&P Capital IQ wrote in a note. "Through September 2012, the year-to-date total was 22. We see an improving trend for FDA first cycle review approvals and a rise in the rate of new drug approvals for rare diseases, which we think is helping to boost investor sentiment for the agency, after years of criticism stemming from inconsistency in making and communicating its decisions."

Over the year, biotech companies have helped drug manufacturers balance out revenue losses from expiring patents, since their processes are much faster than pharmaceutical companies that go through the detailed R&D process of new drug development.

Athersys, for example, is working on its MultiStem cell therapy system, a patented platform for ailments across multiple biological systems – namely cardiovascular, neurological, inflammatory, and immune.

Meanwhile, Santarus is focusing on the GLUMETZA and CYCLOSET tablets, supplements to diet and exercise for patients with type 2 diabetes. The company has gained 200 percent in 2012.

Those are just two examples of the kinds of developments occurring in the biotech world right now. Five Star Equities believes a slump for pharmaceutical companies, what it calls a “patent cliff,” was beneficial to the biotech industry in 2012.

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