Perhaps the plateau reached in June was but a temporary resting place for biotech stocks, for the positive news keeps on flowing. In June, the FDA finally approved Corixa Corp. and GlaxoSmithKline plc’s non-Hodgkin’s lymphoma drug Bexxar and MedImmune Inc.’s intranasal flu vaccine FluMist. As well, the agency gave its approval to Xolair, the antibody-based therapy for asthma developed by Genentech Inc., Novartis Pharmaceuticals Corp. and Tanox Inc. And on the 2nd of July, Gilead Sciences Inc.’s HIV drug Emtriva (formerly Coviracil) joined the ranks of approved biotech therapies. The FDA’s on a roll – and that bodes extremely well for the sector.

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 June 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 12/02 or 3/03, with some figures adjusted for more recent financings.


Highlights From The June 2003 Stock Report:


§ The biotech stocks surged through the first half of 2003. Since our December 2002 reported, the average market cap of the 253 companies in our universe climbed 29%, from $776 million on December 26, 2002 to $1,002 million on June 27, 2003. The median market cap is up nearly 70%, from $103 million to $174 million.

§ After a long period of lackluster performance, we have turned a corner for the sector as a whole. In their annual reports, many companies have reported an increase in the number of employees, and we see steady revenue growth and stronger pipelines.

§ The average technology value for the entire group is now $1.7 million per employee, with a median value of $0.9 million. This is a significant jump from June 2002, when we reported $1.0 million per employee and $0.5 million per employee, respectively.

§ Almost 40% of the companies in our universe saw their stock prices climb more than 30% over the one year period between June 28, 2002 and June 27, 2003. Moreover, nearly 79% of these companies saw their stock prices recover at least two-fold from their 52-week lows.

§ It’s also encouraging to note that only 14 companies on our list – less than 6% -- sported negative technology values at the end of June. A year ago, 38 firms, or 15%, suffered from negative technology values.

§ Thirty-one companies in the group – or 12% -- now have market caps of $1 billion or greater. And 98% of all firms had market caps of greater than $10 million at the end of June.

§ On the other hand, some companies are still faced with a difficult future. About 20% of the companies on our list have a survival index of less than one year. In June 2003, Sheffield Pharmaceuticals Inc. and Deltagen Inc. filed for bankruptcy, and there will probably be other bankruptcies and delistings to follow in the coming months.

§ Thus, although institutional investors have returned to the biotech sector – as witnessed by the heated market for convertible debt financings in June -- it may be a while until “average” investors jump back into biotech stocks.



Satomi Degami, Research Manager, Recombinant Capital
Jennifer Van Brunt, Editor, Signals