Get ready to profit from the "ASCO Effect."
Each June, the American Society of Clinical Oncology (ASCO) hosts its annual meeting – an event that's attended by 30,000 people and the scene of 4,000 presentations.
And each May, just ahead of this crucial gathering, a select group of oncology stocks takes investors on a pretty wild ride – almost like clockwork.
That's the "ASCO Effect."
The catalyst for this big run-up – in which some stocks double, triple or quadruple in price (or more) – is well-known. A few weeks ahead of the meeting, ASCO posts drug-research abstracts of some of the presenting companies on its Website; investors look at the clinical-trial results contained in the abstracts, and key on the most-promising players – igniting share rallies so torrid that they're remembered for years.
This year's ASCO annual meeting is scheduled for June 1-5 in Chicago.
But, according to the latest reports we've seen, the abstracts are due out at 6 p.m. (EDT) today (Wednesday).
If that deadline is met, you can bet that investors will be scouring those abstracts all night.
If you want an example of the ASCO Effect in action, just look at what happened with OXiGENE Inc. (Nasdaq: OXGN) shares just 12 months ago. As May opened last year, OXiGENE was a relatively unremarkable biotech stock. Indeed, the company was juggling a lot of problems.
OXiGENE faced questions about its management turnover and its cash position. Shareholders were worried about its cancer-drug pipeline. And the stock was trading at less than $2 a share.
In fact, OXiGENE shares had been one of the biotech sector's worst performers in 2010, and the company had to endure the ignominy of a reverse stock split in February 2011.
Then came the ASCO Effect.
A Wild Ride for Biotech Stocks
Traders scoured ASCO's Website and found two abstracts dealing with the company's cancer drug Zybrestat.
That was all it took.
Over a nine-trading-day stretch that began on May 1, 2011, OXiGENE shares soared 218% – on a massive spike in volume. If you include the intraday high, the stock gained as much as 245%.
Money Morning's premium affiliate, Private Briefing, has identified three oncology stocks that could benefit from the ASCO Effect. Click here to check out today's column – and find out everything you need to know.
A Closer Look at ASCO
Created in 1964, ASCO is a not-for-profit organization started by a group of physicians from the American Association of Cancer Research (AACR). Those researchers saw a need for a professional oncology society and set out with a mission to "conquer cancer through research, education, prevention and delivery of high quality patient care."
And with good reason: Behind heart disease, cancer is the No.2 cause of death in the United States.
Nearly 50 years after its founding, ASCO has become a key to oncology research. The Arlington, VA-based group is now global in scope, with members calling 100 different countries their home.
The diverse group includes clinical oncologists from all oncology specialties, sub-specialists and oncology healthcare professionals such as nurses and health care practitioners.
At ASCO's meeting, attendees share ideas and learn about cancer breakthroughs from therapies and diagnostics. The organization has attracted top clinicians and investigators to administer patient care and conduct research. On its Website, the organization boasts that it "will be recognized as the most trusted source of cancer information worldwide."
The boast is backed by statistics: Of the 600 medicines and vaccines developed through biotechnology and clinical trials, more than 40% deal with cancer treatments, according to the Pharmaceutical Research and Manufacturers of America.
Investors are hoping for a true "blockbuster," the kind of breakout drug that can bring in billions of dollars in revenue during its years of patent protection – and that can even transform the drug's developer into a lucrative takeover target.
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About the Author
Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning. With his latest project, Private Briefing, Bill takes you "behind the scenes" of his established investment news website for a closer look at the action. Members get all the expert analysis and exclusive scoops he can't publish… and some of the most valuable picks that turn up in Bill's closed-door sessions with editors and experts.