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Financial Snapshot For September 2006: Stocks Hold Their Own
Stocks in the biotech and specialty pharma sector held their own in the third quarter, closing up a mere percentage point from their second-quarter close. Still, the general market – as measured by the Nasdaq Composite Index – fared better, gaining 4% between June 30 and September 29, 2006.
Although the biotech stocks – as measured by the AMEX Biotechnology Index – underperformed the market during the third quarter, they still exhibited slight gains from the year-ago period. Between September 30, 2005 and September 29, 2006, the AMEX Biotech Index added 3% (while the Comp added 5%).
These aren’t fantastic numbers, to be sure, but at least we can see that the sector is exhibiting some resilience. Going into the fourth quarter, this position could make all the difference between the group ending the year in a slump or on an even keel.
The spate of good news at the end of the third quarter – including FDA’s approval of Amgen Inc.’s new colorectal cancer therapy Vectibix and exciting Phase III results for Acorda Therapeutics Inc.’s MS drug Fampridine-SR – also sets the stage for a positive outcome to the year. Plus, judging by the record-breaking performance of the Dow Jones industrial average, investors were feeling upbeat as they entered the fourth quarter.
Analysts expect that third-quarter earnings for the sector will be mixed, but that the principal companies will once again report strong sales figures for leading drugs. If there is enough upside surprise, it could attract investors to buy into the sector while stock prices are still relatively reasonable – at least compared to the first 9 months of 2005, when the AMEX Biotech Index added 18%, far outperforming the Comp, which shed 1% during the same time frame.
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 4% over the 12-month period from September 30, 2005 to September 29, 2006, generally in line with the AMEX Biotech Index (+3%) and the Nasdaq Composite Index (+5%) for the same time period.
But taken as a whole, the biotech and specialty pharma stocks in our universe did not fare so well. Here we see that the average change in price for the 231 stocks we track was –3% for the 12-month period – indicating that many of the smaller stocks are starting to fade, even as the top-tier group holds its own. For those that are faltering, the fourth quarter will prove critical to their future.
September 2006 Stock Report
The September 2006 Stock Report, published by Recombinant Capital and Signals, includes detailed financial data on 231 publicly traded biotechnology stocks, based on their closing prices on September 29, 2006.
We have been tracking biotech stock performance since February 2000. To access the June 2006 Stock Report, click here. For the others -- February 2000 through March 2006 -- 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 105k), 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 9/29/06
|
% change from 9/30/05
|
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:
|
71%
82%
|
-11%
-10%
|
$1,217
$979
|
$335
$290
|
$1,173
$751
|
$1.7
$2.1
|
($107)
($82)
|
4.0
3.5
|
2.7
3.2
|
|
Genomic
Supply
Average:
Median:
|
55%
55%
|
-18%
-31%
|
$362
$80
|
$62
$24
|
$313
$54
|
$0.8
$0.4
|
($24)
($21)
|
2.4
1.9
|
0.9
0.4
|
|
Genomic
Targets
Average:
Median:
|
64%
64%
|
-11%
0%
|
$461
$300
|
$196
$150
|
$310
$215
|
$0.9
$0.9
|
($62)
($68)
|
3.8
3.4
|
0.8
0.6
|
|
Autoimmune
Average:
Median:
|
70%
64%
|
-7%
-14%
|
$838
$527
|
$182
$163
|
$844
$517
|
$3.4
$2.5
|
($21)
($9)
|
17.9
13.7
|
2.0
1.8
|
|
Cancer
Average:
Median:
|
57%
58%
|
-8%
-23%
|
$666
$138
|
$127
$54
|
$585
$89
|
$1.8
$1.2
|
($43)
($37)
|
4.3
1.8
|
1.9
0.8
|
|
Cardiovascular
Average:
Median:
|
55%
53%
|
-3%
-39%
|
$534
$299
|
$132
$95
|
$459
$313
|
$3.3
$1.3
|
($83)
($73)
|
2.1
1.5
|
1.3
1.3
|
|
Chemistry
Average:
Median:
|
70%
70%
|
-3%
-7%
|
$663
$324
|
$144
$74
|
$543
$236
|
$1.6
$1.0
|
($47)
($35)
|
16.5
2.4
|
1.8
1.0
|
|
CNS
Average:
Median:
|
52%
57%
|
-6%
2%
|
$479
$218
|
$121
$49
|
$478
$174
|
$3.6
$2.0
|
($39)
($31)
|
1.9
1.2 |
2.1
1.2 |
|
Delivery
Average:
Median:
|
66%
67%
|
20%
0%
|
$812
$308
|
$187
$68
|
$751
$267
|
$2.1
$1.8
|
($68)
($39)
|
10.1
1.8
|
5.3
2.4
|
|
Diagnostic/
Imaging
Average:
Median:
|
70%
75%
|
13%
10%
|
$564
$362
|
$70
$52
|
$505
$296
|
$1.7
$1.1
|
($17)
($15)
|
3.1
2.4
|
4.3
1.3
|
|
Gene/Cell
Therapy
Average:
Median:
|
48%
52%
|
-29%
-36%
|
$138
$144
|
$51
$37
|
$106
$95
|
$1.3
$0.8
|
($36)
($19)
|
1.9
1.8
|
0.5
0.6
|
|
Infection
Average:
Median:
|
52%
56%
|
-17%
-41%
|
$262
$135
|
$76
$42
|
$226
$102
|
$1.9
$0.9
|
($41)
($27)
|
3.9
1.4
|
0.9
0.7
|
|
Metabolic
Average:
Median:
|
64%
62%
|
7%
3%
|
$820
$279
|
$165
$78
|
$756
$323
|
$3.7
$1.8
|
($77)
($54)
|
6.9
1.5
|
1.4
1.5
|
|
Other
Average:
Median:
|
52%
58%
|
-23%
-37%
|
$318
$244
|
$94
$91
|
$227
$163
|
$2.5
$2.1
|
($39)
($40)
|
2.0
1.4
|
1.6
1.3
|
|
Revenue-
Driven
Average:
Median:
|
87%
86%
|
4%
-4%
|
$40,370
$24,526
|
$3,108
$2,666
|
$39,401
$20,999
|
$6.3
$4.8
|
($253)
($253)
|
10.2
10.2
|
58.7
25.3
|
|
Screening
Average:
Median:
|
70%
72%
|
13%
-1%
|
$452
$422
|
$118
$89
|
$424
$354
|
$1.6
$1.3
|
($43)
($35)
|
4.3
2.5
|
1.2
1.0
|
|
Specialty
Average:
Median:
|
65%
66%
|
61%
61%
|
$398
$288
|
$60
$50
|
$342
$221
|
$2.7
$1.3
|
($45)
($49)
|
1.1
1.1
|
1.3
1.1
|
|
Wound
Average:
Median:
|
77%
82%
|
20%
17%
|
$437
$186
|
$38
$39
|
$402
$152
|
$1.5
$0.8
|
NA
NA
|
NA
NA
|
NA
NA
|
|
Grand
Average:
Median:
|
61%
64%
|
-3%
-7%
|
$1,604
$256
|
$204
$69
|
$1,508
$215
|
$2.2
$1.4
|
($49)
($37)
|
5.0
1.9
|
3.6
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 September 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 6/06, with pro forma adjustments for more recent financings (including debt offerings), if any.
Highlights From The September 2006 Stock Report:
n The average market capitalization for the entire universe was $1,604 million at the end of the third quarter of 2006. That’s less than 1% higher than it was a year ago (on September 30, 2005, the average market cap for the stocks in our universe was $1,589 million).
n There are now 37 companies that sport a market cap of $1 billion or more, while 53 firms have a market cap of $100 million or less.
§ These data suggest that many of the small and mid-cap stocks are beginning to show signs of wear and tear, especially since financing was sub-optimal during the third quarter.
§ On a median basis, the survival index decreased by 0.2 years (from 2.1 years to 1.9 years) between June and September 2006. At the same time, the median annualized burn rate increased from $32 million in June to $37 million in September.
§ Only six groups recorded a survival index that beat the median value. These include first-generation genomics (3.5 years); genomic targets (3.4 years); autoimmune (13.7 years); chemistry (2.4 years); diagnostics (2.4 years); and screening (2.5 years).
§ On the other hand, 42 companies in the group (18% of the whole) ended the third quarter with a survival index of 1 year or less.
§ 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 3.6 over the last 12-month period. The median value, however, has not exceeded 1.0. (In September 2005, the median cash on cash return was 0.9; in September 2006, it stood at 1.0.)
§ Overall, then, it appears that some of the companies in the sector (especially the top-tier) are entering the last quarter of 2006 in excellent shape, while many others are merely trying to hold their own.
Satomi Degami, CFA, Recombinant Capital
Jennifer Van Brunt, Editor, Signals
originally published 10/10/2006 |