|  |
Financial Snapshot For September 2005: Reason To Smile
It was an unusual summer for the biotech sector. Because there are few conferences and meetings, there is often little if any earth-shaking news to move the stocks between June and September. Normally, everything grinds nearly to a halt in August, too – as all of Europe takes a month off and many Wall Streeters head to the Hamptons to escape New York’s sweltering heat.
Yet, this year it was quite different. Financing, for one, kept up at a rapid clip – even through the dog days of August. Investors proved more enthusiastic about buying biotech stocks than they have been for quite some time, and so far it looks like this refreshing change of pace will continue throughout the fall.
In fact, despite the general market’s ongoing concerns about rising interest rates and a huge increase in the cost of oil, these woes don’t seem to have carried over into biotech. The sector has outperformed the market during the first nine months of 2005: The AMEX Biotech Index rose by 18% between December 31, 2004 and September 30, 2005, while the Nasdaq Composite Index shed 1% during the same time frame.
The biotech sector actually didn’t start picking up until the second quarter. Over the first three months of 2005, the AMEX Biotech Index shed 9%, about on par with the Nasdaq Comp, which slipped by 8% during that time period. But since the end of March, the situation has improved remarkably: Between March 31, 2005 and September 30, 2005, The AMEX Index soared 32%, far out-pacing the Comp, which managed a gain of about 8% between March and September.
Over the 12-month period between September 30, 2004 and September 30, 2005, the AMEX Index also fared better than the Comp, adding 24% while the Comp gained 13%.
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 17 stocks that 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, on September 30, 2005, the average 12-month change in price for the 237 stocks tracked by Recombinant Capital and Signals was 10% and the median change was -3%. That means that many of the biotech stocks are finally starting to recover.
This is encouraging news, and stands in sharp contrast to what we’ve seen earlier this year: At the end of June, the average 12-month change in price for the biotech stocks was –11%; at the end of March, it was –28%, much worse.
September 2005 Stock Report
The September 2005 Stock Report, published by Recombinant Capital and Signals, includes detailed financial data on 237 publicly traded biotechnology stocks, based on their closing prices on September 30, 2005.
We have been tracking biotech stock performance since February 2000. To access the June 2005 Stock Report, click here. For the others -- February 2000 through March 2005 -- 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 105k), 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 9/30/05
|
% change from 9/30/04
|
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:
|
67%
68%
|
-14%
-32%
|
$1,177
$675
|
$332
$382
|
$1,090
$568
|
$1.8
$1.6
|
($126)
($101)
|
2.6
2.7
|
2.6
2.5
|
|
Genomic
Supply
Average:
Median:
|
59%
59%
|
-1%
-14%
|
$422
$154
|
$49
$25
|
$391
$131
|
$2.0
$0.4
|
($24)
($16)
|
1.4
0.8
|
1.1
0.4
|
|
Genomic
Targets
Average:
Median:
|
67%
67%
|
-2%
-8%
|
$356
$275
|
$173
$143
|
$230
$197
|
$0.9
$0.6
|
($45)
($49)
|
3.7
3.3
|
0.6
0.5
|
|
Autoimmune
Average:
Median:
|
65%
69%
|
-15%
-21%
|
$782
$598
|
$137
$152
|
$798
$558
|
$4.4
$3.9
|
($46)
($22)
|
4.3
2.2
|
1.7
1.5
|
|
Cancer
Average:
Median:
|
55%
56%
|
-20%
-21%
|
$512
$179
|
$115
$41
|
$444
$127
|
$3.4
$1.7
|
($42)
($32)
|
2.4
1.6
|
1.5
0.7
|
|
Cardiovascular
Average:
Median:
|
70%
77%
|
30%
9%
|
$665
$686
|
$119
$100
|
$601
$670
|
$34.7
$5.4
|
($80)
($77)
|
1.8
1.6
|
1.4
1.5
|
|
Chemistry
Average:
Median:
|
75%
78%
|
24%
19%
|
$468
$266
|
$119
$84
|
$389
$183
|
$1.4
$0.7
|
($17)
($15)
|
5.5
3.4
|
1.2
0.8
|
|
CNS
Average:
Median:
|
67%
67%
|
12%
-4%
|
$487
$218
|
$152
$61
|
$484
$194
|
$6.1
$2.9
|
($33)
($26)
|
2.5
2.2
|
1.5
0.7
|
|
Delivery
Average:
Median:
|
69%
78%
|
13%
-11%
|
$827
$292
|
$168
$68
|
$794
$247
|
$2.2
$2.0
|
($45)
($23)
|
4.9
1.6
|
4.7
3.4
|
|
Diagnostic/Imaging
Average:
Median:
|
72%
80%
|
20%
25%
|
$592
$311
|
$64
$38
|
$542
$288
|
$1.6
$1.7
|
($13)
($14)
|
16.1
2.8
|
4.5
1.1
|
|
Gene/Cell
Therapy
Average:
Median:
|
62%
62%
|
25%
-17%
|
$163
$145
|
$41
$28
|
$143
$126
|
$2.5
$1.2
|
($27)
($21)
|
1.8
1.3
|
0.5
0.4
|
|
Infection
Average:
Median:
|
70%
78%
|
63%
2%
|
$339
$211
|
$50
$43
|
$324
$183
|
$2.5
$1.9
|
($36)
($31)
|
1.6
1.4
|
1.0
0.9
|
|
Metabolic
Average:
Median:
|
77%
85%
|
20%
25%
|
$631
$356
|
$85
$29
|
$637
$284
|
$6.3
$3.0
|
($60)
($35)
|
1.8
1.2
|
1.2
1.0
|
|
Other
Average:
Median:
|
70%
74%
|
43%
-31%
|
$382
$321
|
$81
$56
|
$303
$226
|
$5.1
$3.3
|
($36)
($33)
|
2.6
2.0
|
1.4
1.1
|
|
Revenue-Driven
Average:
Median:
|
89%
94%
|
24%
32%
|
$36,912
$18,388
|
$2,184
$1,498
|
$35,767
$18,080
|
$6.9
$4.9
|
NA
NA
|
NA
NA
|
54.2
21.9
|
|
Screening
Average:
Median:
|
66%
66%
|
7%
3%
|
$388
$291
|
$103
$70
|
$380
$405
|
$2.6
$1.5
|
($49)
($36)
|
2.1
1.9
|
1.0
0.5
|
|
Wound
Average:
Median:
|
49%
57%
|
10%
14%
|
$190
$45
|
$21
$12
|
$172
$47
|
$1.2
$0.6
|
($19)
($19)
|
0.6
0.6
|
1.0
0.2
|
|
Grand
Average:
Median:
|
67%
69%
|
10%
-3%
|
$1,589
$276
|
$171
$56
|
$1,514
$224
|
$4.2
$1.9
|
($42)
($28)
|
3.5
1.8
|
3.5
0.9
|
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 2005 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.
§ Most of the accounting figures are from quarterly reports as of 6/05, with pro forma adjustments for more recent financings (including debt offerings), if any.
Highlights From The September 2005 Stock Report:
§ We added the following companies to our list. All of these completed IPOs in late 2004 or 2005: Adeza Biomedical Corp.; Advanced Life Sciences Holdings Inc.; Aspreva Pharmaceuticals Corp.; Cardiovascular Biotherapeutics Inc.; Coley Pharmaceutical Group Inc.; CoTherix Inc.; Favrille Inc.; Icagen Inc.; Threshold Pharmaceuticals Inc.; ViaCell Inc.; and XenoPort Inc.
§ We have witnessed a strong recovery since March 2005. On average, the market capitalization of our group as a whole gained about 32%, from $1,206M to $1,589M in the six-month period. The median market cap gained 29%, from $214M in March 2005 to $276M in September 2005.
§ Accounting figures have improved since March, too: The average pro form liquidity is up 19%, from $143M to $171M and the average burn rate is down 13%. That means that the survival index looks much better, too: At the end of September, it stood at 3.5 years, compared to 2.9 years six months ago.
§ While all these indicators are positive, we do remain concerned about the drastic increase in short-term (ST) and long-term (LT) debt in the biotech sector. In our universe of 237 companies, 165 now carry ST/LT debt on their balance sheet. Two years ago, in September 2003, the total ST/LT debt of the group was about $17B. One year ago, in September 2004, that figure had jumped by 23%, to $20.9B. And now, the figure totals $22.3B – a 31% increase since 2003.
§ While over 80% of the companies (193/237) are running at a loss each quarter, about 20% report some profit. When all net losses and profits are combined together, the industry managed to produce a net profit of $144M.
§ This figure is misleading, though, because it includes superstar Amgen’s data. When they are removed from the sum, the picture changes dramatically. As of its 2Q 2005 report, Amgen carries a total debt of $3.9B; minus that, the total ST/LT debt of the entire group is $18.4B. However, the group is now running at a net quarterly loss of $884M. Much of the long-term debt consists of convertible notes: If a company’s stock performs well in the future, then it will be converted into equity at a discount to the market price. The biotech stocks may be on the ascent right now, but how long will that last?
Satomi Degami, CFA, Recombinant Capital
Jennifer Van Brunt, Editor, Signals
originally published 10/07/2005 |