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Financial Snapshot For March 2005: Sliding South
So far, 2005 hasn’t been an especially great year for the biotech sector. Drug safety concerns that arose in the fall of 2004 have only increased over time – highlighted particularly by Biogen Idec Inc. and Elan Corp. plc’s decision in late February to withdraw their very promising multiple sclerosis drug Tysabri from the market due to several serious, even fatal, events associated with its use.
There have been a number of clinical setbacks, too -- most recently, Serono SA’s decision to halt the development of not one, but two late-stage drug candidates. In the first instance, two patients in a Phase III trial of Onercept, a tumor necrosis factor binding protein for treating psoriasis, contracted sepsis and one of them died. In the second instance, Serono stopped development of the cancer vaccine Canvaxin after an interim analysis indicated that it would provide no survival benefit over the placebo in patients with Stage IV melanoma.
The stream of negative news has done nothing to calm nervous investors, of course, so it’s understandable that the biotech stocks haven’t fared too well this year. Between December 31, 2004 and March 31, 2005, the AMEX Biotech Index shed 9%, while the Nasdaq Composite Index dropped by 8% over the same time period.
As well, over the 12-month period between March 31, 2004 and March 31, 2005, the biotech stocks lost some ground, with the AMEX Biotech Index dropping by 6%, underperforming the Comp, which exhibited no change during the 12-month period.
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 March 31, 2005 the average 12-month change in price for the 235 stocks tracked by Recombinant Capital and Signals was -28% and the median change was -34%. That means that many, if not most, of the biotech stocks are being hit much harder than the tracking index suggests. The older, more established companies seem to be holding their own, but the less mature are beginning to suffer.
March 2005 Stock Report
The March 2005 Stock Report, published by Recombinant Capital and Signals, includes detailed financial data on 235 publicly traded biotechnology stocks, based on their closing prices on March 31, 2005.
We have been tracking biotech stock performance since February 2000. To access the December 2004 Stock Report, click here. For the others -- February 2000 through September 2004 -- 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 100k), 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 3/31/05
|
% change from 3/31/04
|
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:
|
55%
61%
|
-28%
-26%
|
$1,019
$567
|
$289
$340
|
$981
$606
|
$1.8
$1.3
|
($184)
($129)
|
1.7
1.5
|
2.4
2.8
|
|
Genomic
Supply
Average:
Median:
|
57%
56%
|
-28%
-38%
|
$396
$166
|
$43
$31
|
$370
$145
|
$1.4
$0.6
|
($25)
($26)
|
1.1
0.7
|
1.1
0.4
|
|
Genomic
Targets
Average:
Median:
|
56%
58%
|
-28%
-29%
|
$349
$306
|
$130
$98
|
$269
$114
|
$0.8
$0.5
|
($56)
($59)
|
5.7
2.0
|
0.5
0.3
|
|
Autoimmune
Average:
Median:
|
57%
56%
|
-28%
-34%
|
$589
$458
|
$124
$104
|
$566
$416
|
$3.3
$2.5
|
($70)
($64)
|
3.5
2.1
|
1.4
1.6
|
|
Cancer
Average:
Median:
|
44%
42%
|
-41%
-41%
|
$454
$165
|
$109
$33
|
$395
$126
|
$3.4
$1.4
|
($46)
($29)
|
1.9
1.0
|
1.5
0.5
|
|
Cardiovascular
Average:
Median:
|
59%
62%
|
0%
-28%
|
$452
$403
|
$91
$69
|
$406
$360
|
$4.2
$3.6
|
($78)
($52)
|
1.2
1.1
|
1.2
1.4
|
|
Chemistry
Average:
Median:
|
52%
54%
|
-35%
-33%
|
$274
$161
|
$93
$80
|
$219
$108
|
$0.8
$0.4
|
($45)
($20)
|
1.8
1.8
|
0.8
0.6
|
|
CNS
Average:
Median:
|
51%
53%
|
-43%
-36%
|
$407
$128
|
$106
$28
|
$397
$134
|
$4.6
$2.2
|
($41)
($31)
|
1.3
0.8
|
1.1
0.7
|
|
Delivery
Average:
Median:
|
55%
56%
|
-35%
-35%
|
$684
$177
|
$121
$33
|
$686
$143
|
$1.9
$1.5
|
($41)
($27)
|
5.8
0.7
|
4.7
2.1
|
|
Diagnostic/Imaging
Average:
Median:
|
64%
70%
|
6%
-16%
|
$564
$214
|
$62
$37
|
$518
$198
|
$1.4
$1.0
|
($14)
($12)
|
11.7
1.7
|
4.4
1.4
|
|
Gene
Therapy
Average:
Median:
|
53%
51%
|
-18%
-33%
|
$178
$96
|
$39
$16
|
$162
$86
|
$1.9
$1.4
|
($28)
($19)
|
1.6
0.8
|
0.5
0.3
|
|
Infection
Average:
Median:
|
54%
53%
|
-36%
-35%
|
$249
$121
|
$34
$25
|
$255
$138
|
$2.8
$1.5
|
($32)
($22)
|
1.5
1.3
|
0.6
0.5
|
|
Metabolic
Average:
Median:
|
54%
59%
|
-34%
-31%
|
$378
$241
|
$44
$30
|
$423
$211
|
$4.0
$2.4
|
($92)
($37)
|
1.6
0.8
|
0.9
0.7
|
|
Other
Average:
Median:
|
64%
67%
|
NA
NA
|
$340
$177
|
$63
$54
|
$279
$125
|
$3.5
$2.1
|
($53)
($45)
|
1.4
1.2
|
1.0
1.0
|
|
Revenue-Driven
Average:
Median:
|
80%
83%
|
0%
3%
|
$26,662
$14,385
|
$1,977
$829
|
$25,960
$14,654
|
$5.1
$3.6
|
NA
NA
|
NA
NA
|
39.8
15.5
|
|
Screening
Average:
Median:
|
44%
39%
|
-52%
-56%
|
$259
$244
|
$85
$63
|
$268
$217
|
$1.6
$1.1
|
($59)
($26)
|
3.3
1.7
|
0.7
0.4
|
|
Wound
Average:
Median:
|
59%
70%
|
7%
9%
|
$127
$55
|
$9
$4
|
$118
$53
|
$0.9
$1.0
|
($20)
($20)
|
0.1
0.1
|
0.6
0.5
|
|
Grand
Average:
Median:
|
54%
55%
|
-28%
-34%
|
$1,206
$214
|
$143
$43
|
$1,163
$168
|
$2.5
$1.5
|
($48)
($28)
|
2.9
1.2
|
2.8
0.7
|
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 March 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 9/04, with pro forma adjustments through 3/05 for recurring losses and more recent financings (including debt offerings), if any.
Highlights From The March 2005 Stock Report:
§ Last year at this time, the biotech stocks were still gaining strength, fueled by a great performance in 2003. In March 2004, the average 12-month change in price for the 216 stocks in our universe was 153%. But then the stocks started slowly losing these gains, and now they’re really starting to show signs of wear and tear. At the end of March 2005, the average 12-month change in price was -28%.
§ Only 27% of the individual stocks in our universe increased in price over the one-year period.
§ Stocks in the Diagnostic/Imaging contingent, for instance, gained an average 6% in value over the year, and the Wound stocks gained an average of 7%. Some groups have stalled, too: Stocks in the Cardiovascular Group exhibited an average change of 0% in value over the 12-month period, as did those in the Revenue-Driven Group.
§ All other groups, however, lost value over the 12-month period, with the Screening contingent taking the biggest hit, losing an average of 52% in value between March 31, 2004 and March 31, 2005. And both Cancer and CNS groups lost an average of more than 40% in price.
§ The average market capitalization of the stocks in our universe fell by more than 10% (from $1,345 million to $1,206 million) during the three-month period between December 31, 2004 and March 31, 2005.
§ While 2004 turned out to be the biotech industry’s second-best financing year in history, 2005 holds no such promise. In fact, we’re beginning to see some warning signs. For instance, the average survival index at the end of March 2005 was 2.8 years. That’s down from the high of 4.1 years in 2004 and back to the level it reached in 2003.
§ The largest contributing factor to the rapid decrease in the survival index is the change in burn rate: Biotech companies tend to increase their spending as fast as their bank accounts increase. For instance, the first part of 2003 was tough on biotech companies, and the average annualized burn rate was $40 million. But as financing picked up during 2004, the pro forma liquidity increased by 20% (as compared to 2003) and the average burn rate went up by 20%, as well.
§ What is more alarming is the rapid increase in debt financing used by the biotech sector as a whole. Several years ago, debt financings were limited to a relatively small number of companies. Now, almost 64% (150/235 companies) of the companies in our universe have some short-term or long-term debt. In March 2003, the total debt carried by our group was about $13.6 billion. In March 2005, the total debt is $22.3 billion, an increase of more than 60% in two years.
Satomi Degami, CFA, Recombinant Capital
Jennifer Van Brunt, Editor, Signals
originally published 04/06/2005 |