Yet, stocks in the biotech and specialty pharma sector managed to end the year in decent shape – even outperforming the market in general. The AMEX Biotech Index gained 11% between Dec. 31, 2003 and Dec. 31, 2004, while the Nasdaq Composite Index rose by 9% during the same time period.

Unfortunately, those gains began to disappear as soon as Wall Street opened its doors for business on Jan. 3, 2005. Over the last three weeks, the Comp has shed 6%, while the AMEX Biotech Index has dropped by 4%. Reportedly, it’s been the worst start to a new year since 1982 – although a flurry of impressive earnings announcements in the weeks to come may be enough to turn the markets in a more positive direction.

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 December 2004 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 6/04, with pro forma adjustments for recurring losses and more recent financings (including debt offerings), if any.


Highlights From The December 2004 Stock Report:


§ What a difference a year makes. In 2003, the average 12-month change in price for the 245 stocks in our universe was 110%. In 2004, the average 12-month change in price was 3% -- indicating that in 2004 many stocks managed at least to hold onto the gains they accrued the previous year.

§ Some stocks, of course, fared far better than that. Stocks in the Cardiovascular group, for instance, gained an average 44% in value over the year; the Wound group gained 29% and the Metabolic group gained 23%, on average.

§ The worst-performing groups, in terms of average change in stock price between Dec. 31, 2003 and Dec. 31, 2004, included Gene Therapy (-10%); Screening (-8%); and Infection (-4%).

§ 2004 was a great year for fund-raising: IPOs and follow-on offerings alone reaped more than $5.6 billion in new financing, and private placements and debt offerings contributed an additional $9.8 billion to the coffers of biotech and specialty pharma companies. It follows, then, that the average pro forma cash was greater in Dec. 2004 than in Dec. 2003 ($155 million vs. $146 million).

§ Market caps at the end of 2004 were higher than they had been at the end of 2003. On Dec. 31, 2004, the average market cap for the entire universe was $1,345 million and the median market cap was $274 million. On Dec. 31, 2003, the average market cap was $1,171 million and the median was $265 million.


§ Thus, as biotech enters the new year, we find that companies are in good financial shape, generally speaking. With an average market cap of $1,345 million and cash reserves of $155 million most firms should be able to navigate the upcoming months with ease, and they’re also prepared to weather any unforeseen downturns.


Satomi Degami, CFA, Recombinant Capital
Jennifer Van Brunt, Editor, Signals