Why Biotech stocks are more volatile than other industries? – (ILMN, FOLD, HEB, ARNA, ACOR)

Posted by on Dec 21, 2012

In the biotechnology industry, several inflection points exist and stocks are inclined to be more volatile than in other industries because of binary-type events, according to Jane Wasman, general counsel and president, international at Acorda Therapeutics Inc (NASDAQ:ACOR). She added that a clinical trial can play a role in making or breaking a company, and if someone gets advance notice on the results, they will have an unfair edge.

Pharmaceutical and biotechnology companies are especially exposed to insider trading as they are involved with the large number of market-moving events, and many have insider knowledge such as multiple clinical trials, regulatory hearings and the takeover and merger agreements that historically have led the skids of drug development.

Utpal Bhattacharya, a professor who studies insider trading at Indiana University’s Kelley School of Business in Bloomington said that the big loser is confidence in the system which leaves no one to play a fixed game. Well rigged or not, their volatility can be seen easily as everyday a number of biotech stocks show a noteworthy change. Moreover, two top gaining companies across the U.S. stock market belong to this industry. It was more interesting when four biotech companies were found in the top 10 list.

Back to recent trade, Illumina, Inc. (NASDAQ:ILMN)’s price increased in the last trading session and marked a new 52-week high of $57.00. The stock was trading on above-average volume after Swiss newspaper L’Agefi reported that Swiss drugmaker Roche Holdings may have signed a deal to acquire the US gene-sequencing company for $8.2 billion.

The stock (ILMN) traded at a volume of 9.07 million shares at a price gain of 7.77%. The share price is now up 17.91% for the past three months. Latest closing price was 12.47% above its 50-day moving average and 22.27% above its 200-day moving average.

While trading at volume higher than average, Amicus Therapeutics, Inc. (NASDAQ:FOLD) fell -46.97% yesterday on drug failure in Fabry disease study. Its previous 52-week high was $7.29 and moved down -1.92% over the same period, trading at a volume of 7.90 million. Shares have declined -41.49% over the trailing 6 months. The stock is currently trading -42.93% below its SMA 50 and -41.49% below its SMA 200.

Over the last 12 months for Hemispherx BioPharma, Inc (NYSEAMEX:HEB), a return on equity of -38.89 percent was realized due to the financial situation and earnings per share reached a value of -$0.11. Earnings are projected to move up 25.00 percent for the coming five years. The stock closed at $0.360, down -0.020 points or -5.19% from previous close and at a distance of -48.94% from 20-day simple moving average. The stock lost more after a federal advisory panel rejected its drug for Chronic Fatigue Syndrome.

Arena Pharmaceuticals, Inc. (NASDAQ:ARNA) moved up 382.35% in this year and its price history showed most recently beta was at 0.23. Overall the last 12 months, the percentage change in the price was 351.00%, hitting the highest of $13.50 on Jun 27, 2012 while lowest level in that period was $1.51 on Jan 05, 2012.


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