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Financial Snapshot For June 2006: Bobbing Along
Stocks in the biotech and specialty pharma sector bounced around during the second quarter, but overall they lost ground, closing the quarter down 7%, right in line with the general market as measured by the Nasdaq Composite Index. In years past, the annual American Society of Clinical Oncology (ASCO) meeting in early June helped lift the stocks as a group, since some of the sector’s leading companies repeatedly reported extremely positive clinical findings on targeted cancer therapies. This year, as we’ve seen, the big pharmas captured most of the ASCO headlines, stealing the spotlight away from biotechs.
The markets have also been reacting to external events – especially tension in the Mid East, soaring oil prices and concerns about interest rates.
But there have been other sector-specific factors at play, too. There’s been talk all year that the leading biotech companies are fully valued and the action, if any, is centered on the smaller firms. As well, in recent days we’ve seen that investors want even more out of the big-cap biotechs: When Genentech Inc. reported its second quarter earnings, for instance, the company’s stock price fell on concerns of future sales of cancer drug Avastin – despite the fact that Genentech’s profit soared by nearly 80% during the second quarter.
Not only did stocks in the biotech and specialty pharma sector slump during the second quarter, but also they’re down for the calendar year. Once again, though, we see that they are dropping in concert with the general market. Between December 30, 2005 and June 30, 2006, the AMEX Biotech Index shed close to 3% in value, while the Comp dropped nearly 2% over the same time frame.
Despite their performance in 2006, though, the stocks are still doing far better than they did last summer. Between June 30, 2005 and June 30, 2006, the AMEX Biotech Index rose by 18%, outperforming the Nasdaq Comp, which climbed by 6% during the same period.
That’s still a solid amount of growth, especially when compared to the previous year. Over the 12-month period between June 30, 2004 and June 30, 2005, the AMEX Biotech Index rose 8%, while the Comp remained unchanged.
Thus, though the sector has put in a lackadaisical performance this year, the stocks on the whole are still in decent shape, and faring better than they did a year ago.
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 20 stocks that currently 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, the 6 stocks in our revenue-driven group gained an average of 14% over the 12-month period from June 30, 2005 to June 30, 2006. That’s slightly less than the AMEX Biotech Index (+18%). But it’s encouraging to see that the 236 stocks in our universe gained an average of 12% over the 12-month period – a big step up from last summer, when the group lost an average 11% between June 30, 2004 and June 30, 2005. (During the same period, the revenue-driven stocks gained 8% in price, on average.)
Once again, these numbers reinforce the premise that the high-growth prospects and often-low valuations of small and mid-cap firms have attracted investors’ interest.
June 2006 Stock Report
The June 2006 Stock Report, published by Recombinant Capital and Signals, includes detailed financial data on 236 publicly traded biotechnology stocks, based on their closing prices on June 30, 2006.
We have been tracking biotech stock performance since February 2000. To access the March 2006 Stock Report, click here. For the others -- February 2000 through December 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 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 104k), 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 6/30/06
|
% change from 6/30/05
|
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%
69%
|
-8%
-8%
|
$1,202
$997
|
$304
$242
|
$1,132
$755
|
$1.6
$2.0
|
($133)
($110)
|
3.3
3.2
|
2.7
3.2
|
|
Genomic
Supply
Average:
Median:
|
54%
50%
|
-16%
-32%
|
$377
$81
|
$64
$32
|
$329
$49
|
$0.8
$0.4
|
($50)
($16)
|
2.5
1.6
|
0.9
0.4
|
|
Genomic
Targets
Average:
Median:
|
64%
68%
|
2%
8%
|
$474
$284
|
$247
$227
|
$281
$217
|
$0.8
$0.8
|
($53)
($62)
|
5.7
5.4
|
0.8
0.6
|
|
Autoimmune
Average:
Median:
|
66%
65%
|
-6%
-9%
|
$727
$515
|
$165
$155
|
$731
$467
|
$2.6
$2.4
|
($100)
($75)
|
4.7
2.5
|
1.8
1.5
|
|
Cancer
Average:
Median:
|
58%
57%
|
5%
-14%
|
$720
$149
|
$143
$65
|
$636
$133
|
$1.7
$1.0
|
($50)
($31)
|
2.7
1.8
|
1.9
0.8
|
|
Cardiovascular
Average:
Median:
|
59%
60%
|
35%
-22%
|
$533
$478
|
$161
$135
|
$428
$475
|
$2.8
$1.7
|
($96)
($78)
|
3.1
1.8
|
1.3
1.3
|
|
Chemistry
Average:
Median:
|
67%
71%
|
23%
-11%
|
$658
$268
|
$115
$83
|
$565
$195
|
$1.6
$0.6
|
($34)
($27)
|
7.7
2.4
|
1.7
0.7
|
|
CNS
Average:
Median:
|
56%
63%
|
15%
0%
|
$506
$170
|
$123
$57
|
$503
$115
|
$4.2
$1.7
|
($35)
($31)
|
3.1
1.7
|
2.1
1.2
|
|
Delivery
Average:
Median:
|
66%
68%
|
29%
10%
|
$812
$320
|
$178
$86
|
$768
$266
|
$2.2
$1.8
|
($34)
($31)
|
2.4
1.8
|
5.3
2.4
|
|
Diagnostic/Imaging
Average:
Median:
|
74%
75%
|
21%
13%
|
$630
$318
|
$68
$47
|
$575
$280
|
$1.5
$1.3
|
($17)
($16)
|
3.4
3.3
|
4.5
1.3
|
|
Gene/Cell
Therapy
Average:
Median:
|
50%
52%
|
-6%
-29%
|
$139
$146
|
$54
$41
|
$106
$103
|
$1.4
$1.3
|
($19)
($17)
|
2.0
2.0
|
0.5
0.6
|
|
Infection
Average:
Median:
|
51%
56%
|
-11%
-14%
|
$256
$122
|
$85
$45
|
$204
$95
|
$1.4
$0.9
|
($48)
($27)
|
2.5
1.5
|
0.9
0.7
|
|
Metabolic
Average:
Median:
|
77%
76%
|
54%
63%
|
$900
$278
|
$167
$120
|
$885
$414
|
$4.5
$2.9
|
($77)
($52)
|
2.6
1.9
|
1.4
1.5
|
|
Other
Average:
Median:
|
59%
59%
|
7%
-27%
|
$331
$230
|
$116
$102
|
$219
$121
|
$2.4
$1.1
|
($35)
($29)
|
3.7
2.3
|
1.6
1.3
|
|
Revenue-Driven
Average:
Median:
|
81%
80%
|
14%
5%
|
$38,175
$21,655
|
$2,299
$1,754
|
$37,161
$20,581
|
$6.0
$4.5
|
($90)
($90)
|
7.7
7.7
|
58.7
25.3
|
|
Screening
Average:
Median:
|
62%
61%
|
20%
21%
|
$409
$435
|
$119
$94
|
$363
$372
|
$1.5
$1.5
|
($64)
($31)
|
2.9
3.1
|
1.2
1.0
|
|
Specialty
Average:
Median:
|
74%
76%
|
63%
63%
|
$437
$255
|
$68
$65
|
$373
$173
|
$3.1
$1.1
|
($38)
($44)
|
1.1
1.1
|
1.3
1.1
|
|
Wound
Average:
Median:
|
66%
71%
|
43%
48%
|
$331
$126
|
$23
$15
|
$364
$220
|
$1.3
$0.6
|
($169)
($169)
|
0.1
0.1
|
1.5
1.5
|
|
Grand
Average:
Median:
|
63%
64%
|
12%
0%
|
$1,540
$255
|
$184
$83
|
$1,457
$196
|
$2.1
$1.4
|
($51)
($32)
|
3.1
2.1
|
3.5
1.0
|
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 June 2006 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 12/05, with pro forma adjustments for more recent financings (including debt offerings), if any.
Highlights From The June 2006 Stock Report:
n As we’ve already seen, the revenue-driven group outperformed the universe as a whole, in terms of 12-month percent gain in price, on average – but not by much (14% vs. 12%).
n The average market capitalization for the entire universe was $1,540 million at the end of the second quarter of 2006. That’s an 11% gain from the year-ago value: On June 30, 2005, the average market cap was $1,387 million. And, compared to 2 years ago, the average market cap is nearly 20% higher: On June 30, 2004, the average market cap was $1,286 million.
§ Again, these data suggest that many of the small and mid-cap stocks are in good shape right now. It’s not hard to see why investors might favor them over the large-cap biotechs.
§ Financings over the last 12 months have helped boost the average liquidity for the entire group from $152 million at the end of June 2005 to $184 million at the end of June 2006.
§ The average cash on cash returns from the IPO price (the current stock price/IPO price per share [split-adjusted]) have ranged from 3.0 to 3.5 over the last 12-month period. The median value, however, has not exceeded 1.0. (In June 2005, the median cash on cash return was 0.7; in June 2006, it stood at 1.0.)
§ The average survival index has ranged from 3.3 years in 2005 to 3.1 years in 2006 – a slight drop that may indicate that some companies are just starting to feel a cash crunch.
§ However, on the whole it appears that the sector is entering the second half on 2006 in good shape, despite general unease in the markets as a whole.
Satomi Degami, CFA, Recombinant Capital
Jennifer Van Brunt, Editor, Signals
originally published 07/14/2006 |