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Financial Snapshot For June 2008: Dire Straits
The second quarter of 2008 proved to be as challenging to the economy as the first: The weak dollar, the high price of crude oil, the soaring price of gas, the ongoing credit and mortgage nightmare and fears of a recession affected all business sectors. By all accounts, Wall Street is expecting second-quarter corporate earnings reports to be dismal.
The capital markets have not been kind to stocks, either, though the biotechs have fared better than expected. In the first half of the year, the Amex Biotechnology Stock Index shed 7% of its value, clearly outperforming the broader market, which dropped by 13% (as measured by the Nasdaq Composite Index) over the same time frame.
And even though investors have shunned IPOs this year, they still seem to view biotech stocks – at least the top-tier -- as safe havens. In this regard, biotech’s elite have replaced big pharma companies and health benefits providers, which used to be viewed as immune to the market’s vagaries.
Unfortunately, the vast majority of biotech and specialty pharma stocks haven’t reached this threshold, nor will they as long as investors see them as risky ventures.
These stocks also lost ground in the 12-month period between June 29, 2007 and June 27, 2008 (a 5% drop as measured by the AMEX Biotech Index), but once again they outperformed the general market, which lost 11% of its value during the same time period.
We use the AMEX Biotech Index to track the performance of the biotech stocks as a group – but it’s important to recall that the 20 stocks that currently comprise this index (which is equal dollar weighted) represent the biotech sector’s top-tier companies – and their performance may not reflect what’s happening to the group as a whole.
Indeed, although the AMEX Biotech Index dropped by 5% between June 2007 and June 2008, the 227 stocks in our universe shed an average of 25% over the same time frame. And the median loss was 39%.
With traditional financing sources drying up (only one biotech IPO in the U.S. and nine follow-on public offerings priced in the first half of 2008, compared to 16 IPOs and 25 follow-ons in the first half of 2007) and stock prices faltering, most biotech and specialty pharma companies are in trouble, and if the economic environment doesn’t improve over the next six months, many of these firms will be in dire straits.
June 2008 Stock Report
The June 2008 Stock Report, published by Recombinant Capital and Signals, includes detailed financial data on 227 publicly traded biotechnology stocks, based on their closing prices on June 27, 2008.
We have been tracking biotech stock performance since February 2000. To access the March 2008 Stock Report, click here. For the others -- February 2000 through December 2007 -- click here to go to Signals' Table Of Contents. [We did not publish Stock Reports for the June 2001 - September 2001 time frame.] Click on the year of interest; you will find all the Stock Reports listed under the Signals vs. Noise section. (The spreadsheets underlying these articles are quite large, and may take some time to download.)
We've classified the companies on the list into 17 separate categories, based largely on either technology or disease focus. These categories can be found in the table that follows, which provides a summary of the underlying data and the average values (the sum of all values divided by the number of values) for each. Because the average value tends to be distorted when there are extreme values in a set (as occurs in the biotech stocks as a group and even within groups), we've also calculated the median (mid-point) for each set of data and for the entire group. We believe that the median values reflect a more realistic financial profile for the biotech stocks.
If you wish to access the entire spreadsheet (HTML 100k), just click here. If you wish to access the section of the spreadsheet that concerns a specific category (i.e., cancer or gene therapy), click on that category in the summary table below.
|
Company
|
% 52 wk high on 6/27/08
|
% change from 6/29/07
|
Market cap ($M)
|
Liquidity, pro forma ($M)
|
Company valuation ($M)
|
Valuation/
employee ($M)
|
Burn rate, annualized ($M)
|
Survival index (yrs)
|
Cash/cash from IPO/share
|
|
1st
Generation
Genomics
Average:
Median:
|
54%
57%
|
-13%
7%
|
$882
$763
|
$146
$175
|
$1,098
$957
|
$2.4
$2.5
|
($113)
($99)
|
3.4
2.4
|
2.8
3.4
|
|
Genomic
Supply
Average:
Median:
|
59%
60%
|
15%
-26%
|
$760
$82
|
$98
$19
|
$750
$63
|
$2.1
$0.5
|
($29)
($17)
|
1.2
0.9
|
1.4
0.5
|
|
Genomic
Targets
Average:
Median:
|
46%
45%
|
-27%
-51%
|
$370
$324
|
$167
$170
|
$212
$113
|
$1.1
$0.4
|
($90)
($63)
|
2.3
1.9
|
0.6
0.3
|
|
Autoimmune
Average:
Median:
|
42%
37%
|
-41%
-56%
|
$751
$178
|
$232
$92
|
$695
$175
|
$3.6
$1.3
|
($69)
($39)
|
4.7
3.4
|
1.8
0.2
|
|
Cancer
Average:
Median:
|
43%
40%
|
-44%
-52%
|
$335
$82
|
$119
$44
|
$270
$59
|
$7.9
$0.6
|
($46)
($41)
|
2.6
1.2
|
0.9
0.3
|
|
Cardio-
vascular
Average:
Median:
|
45%
41%
|
97%
-38%
|
$264
$108
|
$77
$56
|
$242
$82
|
$2.0
$1.0
|
($54)
($41)
|
1.0
1.0
|
0.4
0.1
|
|
Chemistry
Average:
Median:
|
51%
52%
|
-35%
-42%
|
$730
$185
|
$142
$69
|
$654
$149
|
$1.2
$0.6
|
($90)
($52)
|
4.9
1.1
|
1.3
0.5
|
|
CNS
Average:
Median:
|
46%
44%
|
-36%
-42%
|
$447
$129
|
$137
$72
|
$403
$96
|
$2.5
$1.1
|
($46)
($45)
|
1.7
k1.6
|
0.9
0.4
|
|
Delivery
Average:
Median:
|
46%
46%
|
-43%
-50%
|
$383
$152
|
$154
$47
|
$348
$129
|
$1.6
$1.0
|
($42)
($30)
|
1.9
1.5
|
3.1
0.7
|
|
Diagnostic/
Imaging
Average:
Median:
|
53%
61%
|
-26%
-34%
|
$703
$432
|
$90
$47
|
$640
$335
|
$2.3
$1.4
|
($28)
($16)
|
3.4
2.5
|
3.2
0.9
|
|
Gene/Cell
Therapy
Average:
Median:
|
43%
46%
|
-35%
-29%
|
$118
$91
|
$35
$24
|
$108
$63
|
$1.3
$0.9
|
($32)
($26)
|
1.1
1.2
|
0.3
0.2
|
|
Infection
Average:
Median:
|
59%
58%
|
-13%
-32%
|
$221
$157
|
$90
$50
|
$176
$127
|
$1.8
$0.8
|
($37)
($31)
|
2.0
1.4
|
0.6
0.3
|
|
Metabolic
Average:
Median:
|
54%
58%
|
-12%
-29%
|
$806
$256
|
$220
$123
|
$805
$265
|
$4.3
$2.3
|
($100)
($70)
|
1.8
1.3
|
1.0
0.9
|
|
Other
Average:
Median:
|
46%
50%
|
-29%
-44%
|
$305
$229
|
$106
$60
|
$212
$124
|
$2.3
$1.1
|
($33)
($34)
|
14.3
2.3
|
1.2
0.7
|
|
Revenue-Driven
Average:
Median:
|
83%
86%
|
8%
9%
|
$39,896
$38,183
|
$3,605
$1,747
|
$39,277
$37,295
|
$9.3
$5.7
|
NA
NA
|
NA
NA
|
46.7
31.8
|
|
Screening
Average:
Median:
|
44%
43%
|
-38%
-51%
|
$422
$178
|
$186
$77
|
$328
$176
|
$1.3
$1.0
|
($51)
($56)
|
6.1
2.2
|
0.9
0.7
|
|
Specialty
Average:
Median:
|
55%
41%
|
-25%
-48%
|
$344
$173
|
$54
$55
|
$319
$161
|
$3.5
$1.4
|
($48)
($33)
|
1.8
1.7
|
0.8
0.7
|
|
Grand
Average:
Median:
|
50%
46%
|
-25%
-39%
|
$1,557
$178
|
$213
$64
|
$1,498
$132
|
$3.3
$1.0
|
($51)
($38)
|
2.8
1.4
|
2.5
0.5
|
Footnotes to the table:
§ ST & LT Debt: Short-term and long-term debt.
§ Company valuation: Market cap + short-term and long-term debt, minus pro forma cash and cash equivalents.
§ Annualized burn rate: Net loss from the last available quarterly report, X4. Companies with net profit (instead of loss) are indicated as "na."
§ Survival index: Cash (plus cash equivalents) / Estimated burn rate.
§ Cash/cash from IPO/share: cash on cash return from IPO price = current stock price / IPO price per share (split-adjusted).
§ Price/share at IPO: IPO share price, adjusted for all subsequent splits.
§ Median: Middle value in a set of values.
§ The information contained in the June 2008 Stock Report has been obtained from public sources. Where information is not available, it is indicated as “na.” Recombinant Capital cannot warrant the ultimate accuracy of the data. All data are subject to change.
§ All of the accounting figures are from quarterly reports as of March 2008.
Highlights From The June 2008 Stock Report:
n The median market capitalization for the entire universe has continued its descent: It was $178 million at the end of the second quarter of 2008, down from $206 million at the end of the first quarter of 2008 and $264 million at the end of the second quarter of 2007.
n There are now 35 companies that sport a market cap of $1 billion or more, and 6 of those (which comprise the revenue-driven group) have market caps that exceed $10 billion. At the other end of the scale, there are 85 companies whose market cap is $100 million or less. Not surprisingly, about half (47%) of the companies have market caps that lie somewhere in between these extremes, comprising the small- to mid-cap stocks that many investors favor.
n These results are worrisome, because the number of firms with market caps of $100 million or less has increased substantially in just the last 6 months – from 65 in December 2007 to 85 in June 2008.
n Two groups are tied for having the lowest median market cap at the end of the second quarter of 2008: Both Genomic Supply and Cancer have median market caps of $82 million. The highest median market cap, of course, is held by the Revenue-Driven group ($38.2 billion), but the 1st Generation Genomics group holds second place ($763 million).
n In terms of stock performance of individual companies, we find that Genitope Corp.’s took the biggest hit, losing 99% of its value between June 29, 2007 and June 27, 2008. Favrille Inc.’s stock wasn’t far behind, though: It lost 98% of its value during the same time frame.
n On the other end of the scale, Questcor Pharmaceuticals Inc.’s stock jumped 924% between June 2007 and June 2008. Iomai Corp.’s stock came in second, increasing by 256% during the 12-month period.
§ The median cash on cash return from the IPO price (the current stock price/IPO price per share [split-adjusted]) was 0.5 at the end of June 2008, substantially lower than the median value of 0.8 obtained at the end of June 2007.
§ Only a handful of stocks achieved a cash-on-cash return from the IPO price of at least 5X: These included Myriad Genetics Inc. (5.3X), Illumina Inc. (5.4X), Alexion Pharmaceuticals Inc. (8.8X), ImClone Systems Inc. (5.7X), OSI Pharmaceuticals Inc. (6.8X), Vertex Pharmaceuticals Inc. (7.2X), Acorda Therapeutics Inc. (5.5X), Noven Pharmaceuticals Inc. (19.8X), Enzo Biochem Inc. (13.4X), Gen-Probe Inc. (6.9X), and Idexx Laboratories Inc. (13.4X) – as well as the 6 stocks in the Revenue-Driven group. Of those, the biggest winner is Amgen Inc., whose stock provided a return of 132.5X from the IPO price.
Satomi Degami, CFA, Recombinant Capital
Jennifer Van Brunt, Editor, Signals
originally published 07/09/2008 |