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Financial Snapshot For December 2005: Smaller Stocks Need To Catch Up
There was a general air of unrest in the broad markets towards year’s end – caused principally by rising interest rates and oil prices – that depressed the Dow Jones industrial average sufficiently for it to post a year-over-year loss (-0.6%) for the first time in three years. Many market watchers concluded that the rally, which had an impressive start in October, all but lost its steam by December.
That didn’t apply to biotech and specialty pharma stocks, though, which fared well in the waning months of 2005: Between September 30, 2005 and December 30, 2005, the AMEX Biotech Index gained 5%, doubling the Nasdaq Composite Index’ 2.5% gain over the same time period. And for the year, the picture looked even better: Between December 31, 2004 and December 30, 2005, the AMEX Biotech Index soared 25%, while the Comp, with a 2% gain, was nearly flat during the same time frame.
When viewed year-on-year, the sector performed significantly better in 2005 than it did in 2004 – but still couldn’t top 2003. In 2004, the AMEX Biotech Index gained 11% over the course of the year, slightly outpacing the Nasdaq Comp, which added 9% in the same time frame. In 2003, however, the AMEX Biotech Index rocketed 45% over the course of the year. To put that in perspective, though, the bulls started charging in the latter half of 2003, pushing the Nasdaq Comp to climb 50% between December 31, 2002 and December 31, 2003.
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, it’s widely thought that the sector’s impressive performance in 2005 was largely due to the behavior of the large-cap companies – Genentech Inc., Amgen Inc., and the like – while the smaller companies didn’t fare well at all.
And we’ve also found that to be true. While we don’t group the stocks in our universe by market cap, just glancing at the data is enough to tell you that many of the smaller stocks are faltering. On December 30, 2005, the average 12-month change in price for the 230 stocks tracked by Recombinant Capital and Signals was –5% and the median change was –16%. That’s a world of difference from the performance of the AMEX Index (25%) and again points out the gap between the “haves” and the “have nots.” The 7 stocks in our revenue-driven group (which, of course, includes Genentech and Amgen) gained an average of 28% during the year; the median increase was 29%.
This is disquieting news and we shall have to see whether the smaller stocks will be able to catch the interest of biotech investors in 2006.
December 2005 Stock Report
The December 2005 Stock Report, published by Recombinant Capital and Signals, includes detailed financial data on 230 publicly traded biotechnology stocks, based on their closing prices on December 30, 2005.
We have been tracking biotech stock performance since February 2000. To access the September 2005 Stock Report, click here. For the others -- February 2000 through June 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 102k), 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 12/30/05
|
% change from 12/31/04
|
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:
|
65%
59%
|
-28%
-29%
|
$1,079
$644
|
$300
$357
|
$1,023
$547
|
$1.9
$1.1
|
($126)
($101)
|
2.4
2.4
|
2.3
2.8
|
|
Genomic
Supply
Average:
Median:
|
59%
65%
|
-21%
-22%
|
$452
$141
|
$44
$15
|
$426
$128
|
$2.2
$0.6
|
($24)
($16)
|
1.2
0.5
|
1.1
0.4
|
|
Genomic
Targets
Average:
Median:
|
68%
67%
|
-21%
-29%
|
$398
$253
|
$190
$150
|
$261
$153
|
$0.8
$0.5
|
($50)
($53)
|
3.8
3.5
|
0.5
0.5
|
|
Autoimmune
Average:
Median:
|
79%
92%
|
-17%
-15%
|
$873
$626
|
$140
$154
|
$904
$544
|
$5.0
$5.0
|
($51)
($23)
|
4.0
1.9
|
1.6
1.3
|
|
Cancer
Average:
Median:
|
55%
55%
|
-27%
-36%
|
$568
$162
|
$111
$34
|
$506
$137
|
$3.7
$1.4
|
($42)
($33)
|
2.2
1.2
|
1.6
0.5
|
|
Cardiovascular
Average:
Median:
|
69%
78%
|
23%
-19%
|
$583
$461
|
$104
$86
|
$535
$464
|
$20.7
$4.7
|
($80)
($77)
|
1.6
1.3
|
1.2
1.1
|
|
Chemistry
Average:
Median:
|
71%
72%
|
18%
-3%
|
$538
$243
|
$137
$80
|
$442
$184
|
$1.8
$0.5
|
($17)
($15)
|
5.3
3.1
|
1.4
0.7
|
|
CNS
Average:
Median:
|
72%
75%
|
6%
-10%
|
$637
$254
|
$154
$59
|
$637
$234
|
$7.1
$4.7
|
($28)
($25)
|
2.4
2.0
|
1.8
1.1
|
|
Delivery
Average:
Median:
|
70%
72%
|
-3%
-10%
|
$820
$304
|
$162
$60
|
$794
$254
|
$2.4
$2.2
|
($45)
($23)
|
4.7
1.4
|
5.1
3.4
|
|
Diagnostic/Imaging
Average:
Median:
|
69%
68%
|
7%
4%
|
$570
$355
|
$66
$37
|
$517
$320
|
$1.6
$1.4
|
($13)
($14)
|
15.9
2.5
|
4.2
1.3
|
|
Gene/Cell
Therapy
Average:
Median:
|
56%
54%
|
-15%
-14%
|
$144
$150
|
$35
$24
|
$131
$121
|
$2.0
$1.3
|
($27)
($21)
|
1.5
1.1
|
0.4
0.3
|
|
Infection
Average:
Median:
|
59%
61%
|
3%
-33%
|
$317
$210
|
$60
$44
|
$300
$159
|
$2.5
$2.1
|
($36)
($31)
|
1.5
1.2
|
0.9
0.7
|
|
Metabolic
Average:
Median:
|
77%
80%
|
5%
-3%
|
$703
$227
|
$97
$51
|
$697
$181
|
$6,2
$3.6
|
($60)
($35)
|
2.1
1.0
|
1.2
0.9
|
|
Other
Average:
Median:
|
68%
66%
|
25%
-24%
|
$318
$249
|
$68
$51
|
$253
$203
|
$4.6
$2.8
|
($37)
($34)
|
2.4
1.7
|
1.3
1.0
|
|
Revenue-Driven
Average:
Median:
|
89%
92%
|
28%
29%
|
$38,514
$18,277
|
$2,418
$1,621
|
$37,134
$17,845
|
$7.4
$5.1
|
NA
NA
|
3.8
3.8
|
55.3
22.7
|
|
Screening
Average:
Median:
|
73%
70%
|
0%
-11%
|
$436
$310
|
$91
$59
|
$440
$286
|
$3.2
$1.5
|
($49)
($36)
|
1.9
1.6
|
0.9
0.7
|
|
Wound
Average:
Median:
|
57%
69%
|
3%
11%
|
$223
$132
|
$27
$27
|
$199
$112
|
$1.1
$0.5
|
NA
NA
|
0.4
0.4
|
1.2
1.2
|
|
Grand
Average:
Median:
|
66%
68%
|
-5%
-16%
|
$1,687
$252
|
$179
$58
|
$1,611
$212
|
$3.9
$2.0
|
($42)
($29)
|
3.3
1.7
|
3.6
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 December 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 December 2005 Stock Report:
§ As mentioned above, although the sector leaders performed well in 2005, many of the smaller stocks didn’t follow suit. And this was the second year we witnessed this phenomenon. In 2003, for instance, when investors started flocking back to biotech, the stocks in our universe gained an average of 110% over the course of the year. In 2004, the stocks gained less, an average of 3%. And in 2005, they lost ground, an average of –5%.
§ Stocks in the revenue-driven group, we’ve seen, gained an average of 28% in value between December 31, 2004 and December 30, 2005. Luckily, they weren’t the only group to grab the attention of investors in 2005. Stocks in the cardiovascular group gained 23%, on average, over the course of 2005, and those classed as plays in the chemistry space added an average 18% in value. Some other groups managed to eke out single-digit gains, too.
§ It’s no surprise that the hardest hit groups are exactly the same as those that once were the darlings of Wall Street. Stocks in the 1st generation genomics category lost an average of 28% in value during 2005 and those in genomic supply and genomic targets each shed 21%, on average.
§ It is surprising, though, to note that the cancer group took such a hit in 2005. These stocks, many of which are closely followed, dropped an average of 27% in value between December 31, 2004 and December 30, 2005.
§ Despite this, the sector managed to raise a substantial amount of money in 2005 – about $18.9 billion in new financing. Seventeen companies completed IPOs on U.S. exchanges and there were 60 follow-on offerings. As well, already public firms raised $8.5 billion from private sources – with $5.1 billion of that coming from debt financings.
§ These financings in 2005 helped boost the average liquidity for our entire group to $179 million, 15% more than the previous year, where the average liquidity was $155 million.
§ The majority of companies then, are probably in decent shape for a while – unless their stocks keep losing ground.
Satomi Degami, CFA, Recombinant Capital
Jennifer Van Brunt, Editor, Signals
originally published 01/18/2006 |