Signals vs Noise Article







Financial Snapshot For September 2010: Stocks Retreat From Spring Highs

Financial Snapshot For September 2010
Although stocks on Wall Street enjoyed a strong rally in September, causing the Dow to jump 10%, economic growth in the U.S. still hasn’t picked up by much, according to analysts. Myriad factors are at play here – including high unemployment rates and pressure on the dollar. As well, it’s not yet clear what the financial effects of health care reform will be, nor what new taxes may be lurking in the wings. Still, a slew of positive third-quarter earnings reports (now being unrolled) could renew investors’ optimism about the economy and create an upbeat end to the year.

Stocks in the biotechnology and specialty pharma sector also perked up in September, gaining 3% in value. But in truth the stock prices have been rising all year: As measured by the AMEX Biotechnology Index, the stocks gained 24% in value between December 31, 2009 and September 24, 2010, far out-performing the general market (as measured by the Nasdaq Composite Index or Comp), which rose by 5% over the same time frame.

The stocks also improved over the last 12 months: Between September 25, 2009 and September 24, 2010, the AMEX Biotech Index gained 26% in value, again out-pacing the Comp, which picked up by 14% over the same time period.


AMEX NASDAQ graph

Underlining the strong performance we’ve seen in 2010 is the fact that the AMEX Biotech Index – which currently includes 18 top-tier biotech stocks and is equal-dollar weighted – broke through the 1,000 level for the first time since its inception on December 5, 1994 (that day, it closed at 83.07). The Index broke through very briefly on February 2, but then reappeared on February 16. It has closed above 1,000 ever since.

Still, it’s important to recall that the stocks that comprise the AMEX Biotech Index do, indeed, represent the sector’s top-tier companies – and their performance may not reflect what’s happening to the group as a whole.

That’s certainly the case this time: The 182 stocks in our universe, when taken as a whole, performed far worse than the AMEX Biotech Index – losing 4% in value, on average, between September 25, 2009 and September 24, 2010.

This result is in stark contrast with what we found 6 months ago, when the stocks in our universe had gained an average of 183% in value over the 12-month period from March 27, 2009 and March 26, 2010. These data indicate that the biotech and specialty pharma stocks, as a group, hit their highs late in the first quarter, and have been retreating ever since -- a trend reflected by the AMEX Biotech Index, which shed 6% between March 26, 2010 and September 24, 2010.

But it does not mean that the stocks are in serious trouble – at least not yet.

September 2010 Stock Report


The September 2010 Stock Report, published by Deloitte Recap LLC and Signals, includes detailed financial data on 182 publicly traded biotechnology stocks, based on their closing prices on September 24, 2010.

We have been tracking biotech stock performance since February 2000. To access the March 2010 Stock Report, click here. For the others -- February 2000 through December 2009 -- click here to go to Signals' Table Of Contents. [We did not publish Stock Reports for the June 2001 - September 2001 time frame, nor did we publish one for June 2009 or June 2010.] Click on the year of interest; you will find all the Stock Reports listed under the Signals vs. Noise section.

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 90k), 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 9/24/10

% change from 9/25/09

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:

81%
83%

49%
57%

$2,925
$1,844

$491
$441

$2,759
$1,757

$6.0
$7.0

NA
NA

2.7
2.7

6.5
8.0

Genomic Supply
Average:
Median:

63%
74%

0%
6%

$871
$178

$136
$33

$798
$155

$2.0
$0.3

($42)
($7)

5.8
5.8

0.9
0.3

Genomic Targets
Average:
Median:

60%
52%

-23%
-31%

$343
$313

$161
$171

$258
$222

$0.8
$0.5

($58)
($45)

5.6
2.7

0.3
0.2

Autoimmune
Average:
Median:

76%
85%

-8%
-12%

$1,989
$147

$148
$136

$1,851
$66

$6.8
$1.1

($15)
($15)

10.4
10.4

2.7
0.4

Cancer
Average:
Median:

57%
56%

-17%
-28%

$473
$166

$97
$49

$397
$115

$20.8
$1.2

($78)
($39)

5.0
1.3

0.9
0.4

Cardiovascular
Average:
Median:

68%
65%

40%
35%

$319
$94

$76
$51

$247
$45

$3.7
$2.4

($20)
($20)

1.4
1.4

0.4
0.3

Chemistry
Average:
Median:

67%
70%

-5%
1%

$1,552
$227

$267
$110

$1,366
$196

$2.9
$2.3

($165)
($48)

3.4
3.6

1.9
0.7

CNS
Average:
Median:

70%
74%

7%
-28%

$577
$197

$159
$62

$499
$107

$5.0
$1.4

($21)
($23)

6.5
1.7

1.2
0.6

Delivery
Average:
Median:

68%
66%

0%
-11%

$436
$212

$128
$42

$355
$162

$2.4
$1.6

($34)
($31)

14.4
1.2

1.9
1.1

Diagnostic/
Imag.
Average:
Median:

66%
69%

-5%
-5%

$645
$294

$101
$54

$562
$180

$1.6
$1.2

($26)
($18)

5.8
2.9

2.9
1.1

Gene/
Cell Therapy
Average:
Median:

46%
45%

-31%
-34%

$92
$79

$35
$32

$67
$38

$1.1
$0.7

($25)
($21)

1.1
0.9

0.3
0.2

Infection
Average:
Median:

63%
72%

0%
-1%

$380
$184

$94
$54

$324
$117

$4.1
$1.1

($43)
($32)

1.5
1.0

1.0
0.3

Metabolic
Average:
Median:

67%
68%

14%
25%

$1,005
$549

$171
$125

$1,058
$628

$5.1
$3.2

($57)
($21)

31.3
3.3

1.0
1.1

Other
Average:
Median:

63%
58%

-5%
1%

$263
$176

$81
$71

$195
$140

$2.0
$1.4

($25)
($16)

16.0
4.1

1.0
0.8

Revenue-Driven
Average:
Median:

89%
91%

4%
7%

$28,678
$26,859

$4,859
$2,533

$27,018
$23,441

$7.6
$3.6

NA
NA

NA
NA

50.8
28.6

Screening
Average:
Median:

66%
63%

-19%
-32%

$543
$187

$157
$55

$480
$169

$1.6
$1.3

($44)
($20)

9.0
3.8

0.5
0.2

Specialty
Average:
Median:

59%
65%

3%
-5%

$348
$153

$60
$55

$301
$117

$3.9
$2.6

($32)
($30)

1.5
1.2

0.8
0.4

Grand
Average:
Median:

64%
66%

-4%
-11%

$1,419
$218

$255
$67

$1,293
$170

$5.8
$1.5

($48)
($25)

8.1
1.9

2.8
0.6

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 September 2010 Stock Report has been obtained from public sources. Where information is not available, it is indicated as “na.” Deloitte Recap LLC cannot warrant the ultimate accuracy of the data. All data are subject to change.

§ Most of the accounting figures are from quarterly reports as of June 2010.


Highlights From The September 2010 Stock Report:

  • The median market capitalization for the entire universe has dropped slightly in the last 12 months. It was $218 million at the end of the third quarter of 2010, down from $239 million at the end of the third quarter of 2009.
  • There are now 31 companies that sport a market cap of $1 billion or more, 2 less than there were at the end of March 2010 but three more than there were at the end of September 2009. In each case, the companies which comprise the Revenue-Driven group have market caps that exceed $10 billion.
  • At the other end of the scale, there are 46 companies whose market cap was $100 million or less at the end of September 2010. This represents 25% of all companies in our universe – better than the situation in September 2009, when 31% of the companies in our universe (59/192) had market caps of $100 million or less.
  • That leaves 105 companies, or about 58% of our universe, with market caps between $100 million and $1 billion.
  • The group exhibiting the lowest median market cap at the end of September 2010 was Gene/Cell Therapy ($79 million). The highest median market cap, of course, was held by the Revenue-Driven group ($26.9 billion), but the First Generation Genomics group holds second place ($1.8 billion).
  • Company valuations – defined as the market cap plus debt minus cash – have declined over the last 12 months, from a median valuation of $200 million in September 2009 to a median valuation of $170 million in 2010.
  • More than half – 54% -- of the stocks in our universe dropped in value between September 25, 2009 and September 24, 2010.
  • The median cash on cash return from the IPO price (the current stock price/IPO price per share [split-adjusted]) was 0.6 at the end of September 2010, the same as it was at the end of September 2009.


Satomi Degami, CFA, Deloitte Recap LLC
Jennifer Van Brunt, Editor, Signals



originally published 10/13/2010


Copyright © 2012. Signals (signalsmag.com) is an online magazine of analysis for biotechnology executives. To contact the Signals editorial department, send e-mail to signals_edit@deloitte.com. Signals is published by: Recap, 2033 N Main Street, Suite 1050 , Walnut Creek, California 94596-3722, Phone: (925) 952-3870