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Financial Snapshot For November 2003: Hangin’ In There
November was a great month for positive news flow in the biotech sector. Congress finally passed the Medicare Prescription Drug and Modernization Act of 2003, which expands access to biotech therapies for senior citizens and also stabilizes and protects federal reimbursement of biotech products and other drugs. As well, the FDA approved Lilly ICOS LLC’s long-awaited pill for erectile dysfunction, Cialis, and Praecis Pharmaceuticals Inc.’s prostate cancer drug Plenaxis – the first approved drug for each biotech company.
Plus, on a broader note, the Commerce Department reported in late November that the economy has picked up speed faster than it thought: It’s now revised the GDP’s growth rate to 8.2% for the third quarter, up from an earlier estimate of 7.2%. Apparently, businesses are starting to spend money again as they see their profits improve.
Yet, Wall Street is still in a cautious mood: The Nasdaq Composite Index gained 1% between October 31, 2003 and November 28, 2003, while the Amex Biotech Index shed 1% during the same time period.
We’ve switched to using the Amex Biotech Index as a surrogate for monitoring the biotech stocks because Nasdaq recently added a substantial number of drug companies (including specialty pharmas and generic manufacturers) to its Biotech Index – rendering that Index much less appropriate for tracking biotech stocks per se. The Amex Biotech Index, on the other hand, which is equal dollar weighted, contains only biotech firms – even though it includes far fewer companies than the Nasdaq Biotech Index (17 biotechs vs. 74 biotechs). (For more on this subject, see the Signals article, “NBI On Drugs.”)
Despite the continuing air of caution on Wall Street, however, the biotech sector as a whole has made significant strides this year. The stocks took off in the spring, and extended their gains through late September. Between April 11 and September 19, 2003, the Amex Biotech Index soared by 53%, outperforming the Composite Index, which rose by 40% during the same time frame.
And for the year, the biotech stocks have also exhibited substantial gains, but not enough to outperform the general market. Between December 31, 2002 and November 28, 2003, the Composite Index gained 47%, while the Amex Biotech Index rose by 36%
Over the last 12 months, the Amex Biotech Index also underperformed the Comp, gaining 25% between November 29, 2002 and November 28, 2003, while the Comp rose by 33%.
However, we must remember that the 17 stocks contained in the Amex Biotech Index represent the sector’s top-tier companies – and our data show that these firms actually underperformed the group as a whole during the last 12 months.
On November 26, 2003, the average 12-month change in price for the 245 stocks tracked by Recombinant Capital and Signals was 77% and the median change was 47%. By contrast, the 17 stocks included in the Amex Index exhibited an average 12-month gain of 33% and a median gain of 23%.
This is good news, however, because it means that the smaller stocks, many of which were trading at extremely low prices during 2002, have regained a tremendous amount of ground over the last year. The top-tier stocks, on the other hand, managed to ride out the last so-called biotech winter in good shape and don’t have such a steep uphill climb to regain their former heights.
November 2003 Stock Report
The November 2003 Stock Report, published by Recombinant Capital and Signals, includes detailed financial data on 245 publicly traded biotechnology stocks, based on their closing prices on November 26, 2003.
We have been tracking biotech stock performance since February 2000. To access the October 2003 Stock Report, click here. For the others -- February 2000 through September 2003 -- 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 19 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 96k), 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 11/26/03
|
% change from 11/29/02
|
Market cap ($M)
|
Pro forma cash ($M)
|
Tech value ($M)
|
LT Debt plus Convert.
|
Tech value/staff ($M)
|
Est. burn rate ($M)
|
Survival index (yrs)
|
Equity multiple
|
|
|
77%
74% |
21%
18% |
$1,438
$447 |
$632
$349 |
$806
$228 |
$155
$83 |
$0.6
$0.4 |
($161.7)
($107.2) |
3.3
3.3 |
1.4
1.1 |
|
|
76%
80% |
71%
60% |
$263
$138 |
$81
$43 |
$204
$65 |
$37
$1 |
$0.6
$0.4 |
($29.1)
($26.7) |
1.8
1.5 |
1.5
0.6 |
|
|
79%
80% |
100%
36% |
$339
$296 |
$118
$69 |
$182
$182 |
$19
$1 |
$0.8
$0.4 |
($40.4)
($35.3) |
3.0
2.2 |
1.0
1.0 |
|
|
84%
93% |
30%
30% |
$386
$103 |
$47
$10 |
$339
$93 |
$0
$0 |
$0.5
$0.4 |
($13.2)
($13.2) |
1.7
1.7 |
2.6
1.7 |
|
|
78%
84% |
97%
50% |
$630
$339 |
$124
$51 |
$506
$296 |
$88
$12 |
$6.3
$4.3 |
($43.2)
($30.0) |
6.6
1.3 |
2.3
2.3 |
|
|
70%
71% |
106%
83% |
$449
$195 |
$94
$44 |
$366
$182 |
$46
$1 |
$2.6
$2.1 |
($45.1)
($27.6) |
2.5
1.3 |
1.5
1.2 |
|
|
69%
69% |
73%
19% |
$543
$420 |
$140
$85 |
$402
$214 |
$50
$2 |
$2.9
$1.8 |
($45.7)
($41.6) |
2.9
2.8 |
1.4
1.2 |
|
|
76%
77% |
82%
33% |
$289
$196 |
$132
$77 |
$157
$116 |
$40
$0 |
$0.9
$0.3 |
($32.9)
($13.0) |
8.3
3.9 |
1.4
1.1 |
|
|
73%
72% |
55%
36% |
$545
$206 |
$146
$59 |
$442
$136 |
$150
$0 |
$3.8
$3.9 |
($24.6)
($22.1) |
3.1
2.5 |
1.8
2.1 |
|
|
86%
90% |
59%
60% |
$880
$386 |
$131
$48 |
$783
$239 |
$73
$0 |
$0.6
$0.5 |
($31.8)
($31.8) |
1.4
1.4 |
5.5
1.6 |
|
|
69%
69% |
77%
43% |
$523
$269 |
$108
$57 |
$416
$212 |
$104
$0 |
$2.3
$1.9 |
($43.3)
($17.3) |
3.8
1.1 |
2.1
1.6 |
|
|
81%
83% |
92%
66% |
$522
$343 |
$35
$17 |
$426
$280 |
$6
$0 |
$2.0
$1.6 |
($14.1)
($11.2) |
3.3
1.2 |
5.0
3.3 |
|
|
66%
64% |
71%
37% |
$176
$135 |
$51
$14 |
$125
$110 |
$7
$0 |
$1.3
$1.0 |
($28.1)
($22.2) |
1.6
1.1 |
0.9
0.9 |
|
|
67%
64% |
46%
50% |
$615
$170 |
$100
$38 |
$548
$163 |
$75
$0 |
$3.6
$1.8 |
($39.8)
($28.9) |
1.4
1.1 |
1.1
1.0 |
|
|
76%
78%
|
76%
47% |
$576
$136 |
$103
$24 |
$473
$116 |
$60
$1 |
$2.5
$1.4 |
($68.1)
($12.3) |
3.2
2.3
|
1.5
1.2 |
|
|
64%
62% |
90%
60% |
$207
$134 |
$33
$11 |
$174
$115 |
$11
$1 |
$3.2
$1.0 |
($22.0)
($19.7) |
1.1
0.8 |
1.8
1.2 |
|
|
86%
85% |
53%
37% |
$26,146
$11,086 |
$1,857
$1,061 |
$24,288
$10,457 |
$954
$598 |
$4.8
$4.6 |
NA
NA
|
NA
NA |
5.5
4.0 |
|
|
78%
80% |
77%
31% |
$538
$536 |
$140
$122 |
$398
$323 |
$75
$16 |
$1.9
$1.1 |
($63.9)
($49.2) |
2.0
2.3 |
1.5
1.1 |
|
|
65%
67% |
64%
-15% |
$99
$85 |
$5
$5 |
$94
$82 |
$7
$2 |
$0.8
$0.5 |
($7.3)
($2.3) |
1.1
1.2 |
1.3
1.6 |
|
|
74%
76% |
77%
47% |
$1,081
$246 |
$145
$47 |
$955
$180 |
$73
$1 |
$2.3
$1.4 |
($40.1)
($25.6) |
2.8
1.6 |
2.1
1.4 |
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 November 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 6/03 or 9/03, with pro forma adjustments for more recent financings (including debt offerings).
Highlights From The November 2003 Stock Report:
§ At the end of November 2003, the average market cap for the companies in our universe was $1,081 million, less that 2% lower than it had been at the end of October 2003. The median market cap, however, was $246 million at the end of November, about 3% higher than it was at the end of October.
§ Market caps have improved significantly over the last 12-month period. At the end of November 2002, the average market cap was $779 million and the median was $113 million. One year later, the average market cap had risen by 38% and the median market cap for the entire group had gained 118%.
§ The mid-cap group (stocks with market caps between $200 million and $1 billion) exhibited the strongest one-year gains in price performance, gaining 90%, on average.
§ As another indication that the biotech sector is recovering, only about 2% (6/245) of the stocks were trading below cash at the end of November 2003. Conversely, at the end of November 2002, 18% (41/234) of the companies in our universe had negative technology values.
§ By category, the top performers are Cancer and Genomic Targets, which gained an average of 106% and 100%, respectively, over the last year.
§ The median technology value per employee for the entire group was $1.4 million at the end of November 2003, a significant improvement from the year-ago period, when it was $0.5 million.
§ Despite all the signs of a solid recovery for the sector – and despite the fact that many companies have been able to raise substantial amounts of cash this year – a startling number of firms are running low on money. In fact, 24% (58/245) of the companies in our universe have cash reserves of $10 million or less. For these firms, 2004 will be the make-or-break year.
Satomi Degami, CFA, Recombinant Capital
Jennifer Van Brunt, Editor, Signals
originally published 12/05/2003 |