Biotech stocks made up a big chunk at the annual "reconstituting" of the Russell 3000 Index. Each year around this time, the Russell 3000 is reconfigured and stocks are added to the widely held index. Here's a look at some up-and-coming biotechs about to join the widely held index.
Biotech stocks made up a big chunk at the annual “reconstituting” of the Russell 3000 Index. Each year around this time, the Russell 3000 is reconfigured and stocks are added to or removed from the widely held index.
The list of preliminary additions to the index includes 262 companies, of which 46 are healthcare companies. (You can find a list of all the preliminary additions and deletions here.)
Ziopharm Oncology (NASDAQ: ZIOP) Inc., one of the darlings at the recent American Society of Clinical Oncology meeting, was among the biotechs set to join the list. At ASCO, Ziopharm presented data for its treatment for patients with soft-tissue sarcoma, which showed that when used together with chemotherapy drug Doxorubicin, the progression free survival rate is doubled. The company said its clinical trial was stopped early because of the positive response rate. Ziopharm shares were up 2.7 percent to $4.78 in afternoon trading Monday.
Keryx Biopharmaceuticals Inc. (NASDAQ: KERX) is another biotech to make the list. Perifosine, the company’s potentially first-in-class treatment of advanced colorectal cancer, was fast-tracked by the Food and Drug Administration in April. In May, analysts at Rodman & Renshaw reiterated their "market outperform" rating on Keryx. Its shares were up 6.5 percent to $4.34.
Another stock to watch is Pharmacyclics Inc. (NASDAQ: PCYC), which has had its struggles with the failed clinical trial of its former lead product, Xcytrin. (A failed trial, or failure to secure FDA approval, is typically a death knell for tiny biotechs.) Since then, the company’s brought on new management and acquired some preclinical, early-stage treatments from Celera (NASDAQ: CRA). Preliminary data on two treatments for hard-to-treat lymphoma have been greeted positively by researchers, and the company’s now being called a “comeback kid” by some on Wall Street. Pharmacyclics shares were up 1.1 percent to $6.48.
Among other biotechs on the preliminary addition list that have been recently in the news are Alexza Pharmaceuticals Inc. (NASDAQ: ALXA); AVEO Pharmaceuticals Inc. (NASDAQ: AVEO); BioSante Pharmaceuticals Inc. (NASDAQ: BPAX); Jazz Pharmaceuticals (NASDAQ: JAZZ); and Peregrine Pharmaceuticals Inc. (NASDAQ: PPHM);
Membership on Russell U.S. equity indexes is determined by objective means, such as a company’s market capitalization. Still, inclusion in the index tends to pump up stock prices due to forced institutional buying. That said, inclusion in the Russell indexes is no guarantee of long-term -- or even short-term -- performance. Indeed, the “Russell Effect” is often muted because shareholders tend to sell into the rally to benefit from the short-term spike in price.
The real value to biotechs is the exposure inclusion into such a widely held index will bring. Michael West, chief executive officer of BioTime Inc. (NASDAQ: BTIM), said in a statement, "The expected addition of BioTime to the Russell 3000 Index and Russell Global Index could benefit our shareholders by increasing awareness of BTIM among institutional investors, and the investment community in general, as we continue with our strategy to become a leader in the field of regenerative medicine."
BioTime’s shares were up 7.5% to $6.88 in afternoon trading Monday.
Changes to the additions could still be made, and updates to the preliminary list are scheduled to be posted June 18 and June 25. The final membership lists for the Russell 3000, the Russell 2000 and the Russell 1000 will be posted June 28. With the changes, the combined market capitalization of stocks in the Russell 3000 -- which reflects about 98% of investable U.S. equities — will grow to $13.4 trillion from about $10.6 trillion a year ago. The median market cap of companies included in the index will also increase to $802 million from $578 million.