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Financial Snapshot For January 2003: Treading Water
January proved to be another tough month in the stock market. As if the sagging economy and lackluster corporate profits weren’t enough to make investors nervous, the threat of war with Iraq looms ever closer. In fact, at this point it seems imminent.
Stocks, which actually gained some ground in the first half of the month, have since succumbed to overall market unease. At the end of January, they remained essentially unchanged for the month. The Nasdaq Composite Index dropped by 1% between December 31, 2002 and January 31, 2003; the Nasdaq Biotech Index shed 2% during the same time period.
Even a spate of good news in the biotech sector – the FDA’s positive actions on Amevive, Fabrazyme and Aldurazyme coupled with strong earnings reports from the leading biotech firms – wasn’t sufficient to lift the entire group.
Over the last 12 months, the Nasdaq Biotech Index – which is comprised of the 72 largest and most actively traded biotech stocks – dropped by 40%, underperforming the Nasdaq Composite Index, which lost 32% between January 25, 2002 and January 31, 2003.
Many biotech stocks, however, have suffered more than a 40% drop over the last year. On January 31, 2003, the average 12-month change in price for the 230 stocks tracked by Recombinant Capital and Signals was minus 47% and the median change was minus 54%.
On a positive note, the biotech stocks are still in better shape than they were in mid-July: Between July 10, 2002 and January 31, 2003, the Biotech Stock Index rose by 20% (while the Comp shed 2%).
January 2003 Stock Report
The January 2003 Stock Report, published by Recombinant Capital and Signals, is the 32nd in a series. It includes detailed financial data on 230 publicly traded biotechnology stocks, based on their closing prices on January 31, 2003.
(To access the December 2002 Stock Report, click here. For the others -- February 2000 through November 2002 -- 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, so please be patient while you download them.)
We've classified the companies on the list into 18 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 205k), just click here (and remember, it's a large spreadsheet and takes time to download. Don't despair if your screen seems to remain forever blank after the download; it might take a minute or so for the spreadsheet to appear.) 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 1/31/03
|
% change from 1/25/02
|
Market cap ($M)
|
Cash & Mkt. Sec. ($M)
|
Tech value ($M)
|
LT Debt plus Convert.
|
Tech value/staff ($M)
|
Est. burn rate ($M)
|
Survival index (yrs)
|
Equity multiple
|
|
|
27%
27% |
-70%
-71% |
$734
$300 |
$748
$256 |
($14)
($8) |
$155
$50 |
$0.0
$0.0 |
($128.9)
($40.3) |
2.9
2.8 |
0.8
0.7 |
|
|
48%
49% |
-43%
-49% |
$325
$90 |
$186
$76 |
$139
$25 |
$42
$0 |
$0.4
$0.4 |
($36.3)
($31.0) |
1.6
1.2 |
1.2
0.7 |
|
|
29%
24% |
-69%
-76% |
$140
$49 |
$104
$52 |
$36
$3 |
$14
$1 |
$0.0
$0.0 |
($49.2)
($36.7) |
2.3
1.1 |
0.4
0.3 |
|
|
60%
61% |
-21%
-36% |
$321
$6 |
$35
$2 |
$286
$4 |
$0
$0 |
$0.2
$0.3 |
($3.2)
($1.1) |
0.4
0.7 |
1.4
1.0 |
|
|
53%
59% |
-37%
-36% |
$312
$63 |
$106
$27 |
$206
$22 |
$21
$0 |
$1.5
$1.2 |
($35.5)
($16.4) |
4.2
1.9 |
1.0
1.0 |
|
|
37%
35% |
-54%
-64% |
$195
$97 |
$104
$47 |
$92
$27 |
$19
$0 |
$0.6
$0.3 |
($40.9)
($24.0) |
4.2
1.7 |
0.8
0.5 |
|
|
51%
51% |
-37%
-46% |
$389
$57 |
$109
$47 |
$280
$32 |
$62
$3 |
$1.3
$0.9 |
($44.6)
($26.2) |
2.3
2.0 |
1.0
0.9 |
|
|
40%
42% |
-51%
-46% |
$215
$124 |
$127
$63 |
$88
$53 |
$33
$0 |
$0.4
$0.3 |
($34.7)
($23.6) |
3.8
2.3 |
0.8
0.8 |
|
|
43%
41% |
-58%
-75% |
$479
$80 |
$137
$52 |
$342
$18 |
$99
$0 |
$1.2
$0.4 |
($30.8)
($19.3) |
2.3
1.7 |
0.9
0.4 |
|
|
39%
30% |
-49%
-67% |
$234
$86 |
$112
$26 |
$122
$42 |
$106
$1 |
$0.7
$0.4 |
($60.6)
($35.4) |
1.4
0.9 |
0.9
0.8 |
|
|
53%
51% |
-35%
-37% |
$272
$112 |
$26
$18 |
$246
$91 |
$3
$0 |
$0.9
$0.5 |
($13.2)
($10.0) |
2.1
1.6 |
2.5
1.2 |
|
|
31%
38% |
-66%
-59% |
$78
$33 |
$88
$31 |
($8)
($5) |
$3
$0 |
($0.1)
($0.1) |
($30.8)
($22.8) |
2.6
1.4 |
0.3
0.5 |
|
|
35%
36% |
-53%
-60% |
$574
$71 |
$77
$35 |
$496
$44 |
$33
$1 |
$1.7
$0.7 |
($34.9)
($22.3) |
3.0
0.8 |
(0.3)
0.4 |
|
|
43%
46% |
-32%
-48% |
$451
$82 |
$77
$24 |
$374
$72 |
$3
$0 |
$2.6
$1.0 |
($66.8)
($37.7) |
1.2
1.2 |
3.0
1.4 |
|
|
51%
51% |
-31%
-35% |
$362
$101 |
$64
$19 |
$298
$74 |
$23
$1 |
$0.7
$0.5 |
($19.3)
($12.3) |
1.4
0.9 |
2.1
0.9 |
|
|
69%
72% |
-23%
-20% |
$16,566
$6,896
|
$1,279
$887 |
$15,287
$6,176 |
$782
$333 |
$4.1
$3.0 |
NA
NA |
NA
NA |
4.5
3.2 |
|
|
39%
31% |
-48%
-63% |
$232
$148 |
$124
$77 |
$107
$45 |
$59
$10 |
$0.4
$0.4 |
($47.4)
($29.7) |
4.4
2.2 |
0.6
0.6 |
|
|
64%
67% |
-30%
-21% |
$80
$68 |
$4
$3 |
$76
$63 |
$2
$1 |
$1.0
$0.8 |
($5.3)
($4.2) |
0.5
0.8 |
1.3
1.0 |
|
|
43%
40% |
-47%
-54% |
$770
$104 |
$142
$47 |
$632
$53 |
$55
$0 |
$0.8
$0.4 |
($38.4)
($26.9) |
2.8
1.6 |
1.1
0.7 |
Footnotes to the table:
§ Technology value: Market cap - cash (and cash equivalents)
§ LT debt plus convert.: Long-term debt plus convertible debt
§ Estimated 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.
§ Equity multiple: Market cap / (common stock + preferred stock + additional paid-in capital).
§ Median: Middle value in a set of values
§ The information contained in the January 2003 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 9/02, with some figures adjusted for one-time write-offs.
Highlights From The January 2003 Stock Report:
§ The continued pressure on biotech stock prices has taken a heavy toll. Between January 25, 2002 and January 31, 2003, more than half the companies in our universe saw their stock prices drop by at least 50%.
§ Meanwhile, quite a few companies have been removed from our list due to M&A activity, bankruptcies and delistings. Taking these factors into account, our figures probably have a “survivorship bias,” resulting in an overestimation of returns.
§ At the end of January 2002, there were 253 companies on our list. A year later, that number had been whittled down to 230. This trend will no doubt continue until the markets start to recover.
§ At the end of January 2003, 35 (or 15%) of the stocks on our list closed at $1 per share or less, making them likely candidates for delisting.
§ Obviously, declining stock prices lead to shrinking market caps. At the end of January 2002, the median market cap for the biotech companies in our universe was $210 million. At the end of January 2003, the median market cap was $104 million (the average was $770 million). The median and average market cap values were also at this level at the end of December 2002.
§ If we remove the seven revenue-driven companies from this calculation, then the median market cap for January 2003 drops to $97 million (and the average becomes $296 million). Six months ago, in August 2002, the median market capitalization was $105 million.
§ Thus, despite continued market volatility, one can argue that a market capitalization of about $100 million might be the lowest limit of intrinsic value for the biotech sector as a whole.
§ With such low valuations, an increasing number of companies are trading below cash. At the end of January 2003, 51 (or 22%) of the firms on our list had negative technology values, meaning that their cash, cash equivalents and marketable securities were worth more than their market caps.
§ The list of companies trading below cash includes many of the biotech sector's former high-flyers -- Human Genome Sciences Inc., Incyte Genomics Inc., and Celera Genomics Group, for instance.
§ In fact, investors continue to shun most companies in the once-beloved genomics sector. Stocks of the 1st generation genomics companies lost a median 71% of their value over the last 12 months and genomic targets firms saw their stocks drop by a median 76%. Genomic supply companies fared better, losing a median 49% over the last 12 months.
§ Companies in the CNS group also witnessed a sharp drop in stock price between January 25, 2002 and January 31, 2003: These stocks lost a median 75% in value.
§ Other groups that fell below the grand median loss in stock price of 54% included: cancer (-64%); delivery (-67%); gene therapy (-59%); infection (-60%); and screening (-63%).
§ Raising capital has been tough in these hard economic times. At the end of January, about one-quarter of the companies in our universe had a survival index of less than one year.
§ The average survival index for the entire group of 230 companies is now less than three years, down from 5 years six months ago. However, the average burn rate remains the same – about $38 million on an annual basis.
Satomi Degami, Research Manager, Recombinant Capital
Jennifer Van Brunt, Editor, Signals |