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Financial Snapshot For October 2003: Stocks On New Plateau
October witnessed several important signs that the economy is improving – especially the revelation that the GDP grew faster in the third quarter of 2003 than it had in many years. As well, many public companies posted improved third quarter earnings, although their forecasts for the fourth quarter and full year were still largely conservative. Investors, too, remained cautious, particularly when it came to the biotech sector: The Nasdaq Biotech Index remained essentially flat between September 26 and October 31, 2003, while the Nasdaq Composite Index rose by a modest 8% during the same time period.
Wall Street’s reception of biotech public offerings – both IPOs and follow-ons – reflects investors’ current mood. They haven’t hesitated to buy stocks with a history: The follow-on offerings have been pricing rapidly, with offering companies sometimes selling more shares than they had anticipated. The IPOs, on the other hand, have had a more difficult time: Most of them have priced at the low end of their ranges and one – Aderis Pharmaceuticals Inc. – was first postponed and then withdrawn due to the uncertain market. As well, several of the recent offerings have not fared well in the after-market, and are trading below their IPO prices. (For more details, see the Signals’ article, “Eye On Wall Street.”)
Yet, despite the current air of caution, 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 Nasdaq Biotech Index soared by 58%, outperforming the Composite Index, which rose by 40% during the same time frame.
The biotech stocks have dropped back since late September, shedding about 11% as measured by the Nasdaq Biotech Index, but they’ve still exhibited gains of 44% for the year, about on par with the Comp, which added 45% between December 31, 2002 and October 31, 2003.
Moreover, the Biotech Index gained 40% over the last 12 months, while the Comp added 45% between October 31, 2002 and October 31, 2003. And it’s not just the 75 select stocks that comprise the Biotech Index that have fared well, either: In fact, many of the others have done far better. On October 31, 2003, the average 12-month change in price for the 246 stocks tracked by Recombinant Capital and Signals was 107% and the median change was 61%. To emphasize just how large a recovery this represents, we only have to compare the data from last year at this time. On October 31, 2002, the average 12-month change in price for the companies in our universe was minus 44%, and the median change was minus 50%.
October 2003 Stock Report
The October 2003 Stock Report, published by Recombinant Capital and Signals, includes detailed financial data on 246 publicly traded biotechnology stocks, based on their closing prices on October 31, 2003.
We have been tracking biotech stock performance since February 2000. To access the September 2003 Stock Report, click here. For the others -- February 2000 through August 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 94k), 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 10/31/03 |
% change from 10/31/02 |
Market cap ($M) |
Cash & Mkt. Sec. ($M) |
Tech value ($M) |
LT Debt plus Convert. |
Tech value/staff ($M) |
Est. burn rate ($M) |
Survival index (yrs) |
Equity multiple |
1st
Generation
Genomics
Average:
Median: |
76%
78% |
80%
106% |
$1,541
$733 |
$632
$349 |
$909
$384 |
$155
$83 |
$0.7
$0.6 |
($161.7)
($107.2) |
3.3
3.3 |
1.4
1.1 |
Genomic
Supply
Average:
Median: |
77%
77% |
79%
48% |
$255$
127 |
$81
$43 |
$197
$68 |
$37
$1 |
$0.6
$0.5 |
($29.1)
($26.7) |
1.8
1.5 |
1.4
0.6 |
Genomic
Targets
Average:
Median: |
80%
86% |
93%
46% |
$314
$238 |
$118
$69 |
$157
$138 |
$19
$1 |
$0.6
$0.5 |
($40.4)
($35.3) |
3.0
2.2 |
0.9
0.9 |
Agbio/Enviro.
Average:
Median: |
80%
76% |
28%
37% |
$379
$84 |
$47
$10 |
$331
$74 |
$0
$0 |
$0.5
$0.3 |
($13.2)
($13.2) |
1.7
1.7 |
2.4
1.3 |
Autoimmune
Average:
Median: |
81%
85% |
168%
85% |
$651
$337 |
$124
$51 |
$528
$245 |
$88
$12 |
$5.9
$4.7 |
($43.2)
($30.0) |
6.6
1.3 |
2.3
2.3 |
Cancer
Average:
Median: |
72%
74% |
163%
103% |
$438
$253 |
$92
$41 |
$357
$194 |
$46
$1 |
$2.6
$2.1 |
($45.1)
($27.6) |
2.4
1.2 |
1.5
1.2 |
Cardiovascular
Average:
Median: |
68%
71% |
66%
29% |
$519
$392 |
$140
$85 |
$378
$186 |
$50
$2 |
$2.8
$1.5 |
($45.7)
($41.6) |
2.9
2.8 |
1.4
1.1 |
Chemistry
Average:
Median: |
78%
81% |
104%
31% |
$327
$202 |
$132
$77 |
$194
$140 |
$40
$0 |
$0.9
$0.4 |
($32.9)
($13.0) |
8.3
3.9 |
1.5
1.2 |
CNS
Average:
Median: |
74%
78% |
85%
47% |
$508
$206 |
$135
$59 |
$413
$151 |
$150
$0 |
$3.8
$3.5 |
($24.6)
($22.1) |
2.9
2.2 |
1.7
2.2 |
CRO/Service/Supply
Average:
Median: |
86%
89% |
73%
57% |
$832
$349 |
$131
$48 |
$729
$215 |
$73
$0 |
$0.5
$0.5 |
($31.8)
($31.8) |
1.4
1.4 |
5.6
1.5 |
Delivery
Average:
Median: |
70%
69% |
92%
36% |
$510
$216 |
$101
$44 |
$409
$177 |
$104
$0 |
$2.1
$1.8 |
($43.3)
($17.3) |
3.8
1.1 |
1.9
1.6 |
Diagnostic/Imaging
Average:
Median: |
76%
77% |
102%
69% |
$449
$263 |
$33
$17 |
$371
$223 |
$6
$0 |
$1.8
$1.7 |
($14.1)
($11.2) |
3.3
1.2 |
4.1
3.1 |
Gene
Therapy
Average:
Median: |
68%
69% |
117%
53% |
$176
$130 |
$51
$14 |
$126
$77 |
$7
$0 |
$1.3
$0.9 |
($28.1)
($22.2) |
1.6
1.1 |
0.9
0.7 |
Infection
Average:
Median: |
70%
70% |
101%
65% |
$659
$193 |
$100
$38 |
$588
$162 |
$75
$0 |
$3.4
$1.6 |
($39.8)
($28.9) |
1.4
1.1 |
1.1
1.0 |
Metabolic
Average:
Median: |
79%
87% |
138%
57% |
$588
$140 |
$103
$24 |
$485
$120 |
$60
$1 |
$2.6
$1.3 |
($68.1)
($12.3) |
3.22.3 |
1.6
1.3 |
Other
Average:
Median: |
68%
71% |
133%
59% |
$215
$138 |
$33
$11 |
$182
$121 |
$11
$1 |
$3.5
$1.0 |
($22.0)
($19.7) |
1.1
0.8 |
1.8
1.3 |
Revenue-Driven
Average:
Median: |
85%
85% |
46%
38% |
$23,570
$10,193 |
$1,503
$905 |
$22,067
$9,646 |
$818
$595 |
$4.9
$4.6 |
NA
NA |
NA
NA |
6.0
5.5 |
|
Screening
Average:
Median:
|
75%
71% |
117%
32% |
$511
$540 |
$130
$122 |
$381
$329 |
$75
$16 |
$1.7
$1.1 |
($63.9)
($49.2) |
1.9
2.1 |
1.4
1.1 |
Wound
Average:
Median: |
68%
73% |
109%
34% |
$105
$92
|
$5
$5 |
$101
$89 |
$7
$2 |
$0.9
$0.5 |
($7.3)
($2.3) |
1.1
1.2 |
1.4
1.7 |
Grand
Average:
Median: |
75%
76% |
107%
61% |
$1,098
$239 |
$139
$44 |
$978
$181 |
$73
$1 |
$2.2
$1.3 |
($40.1)
($25.6) |
2.8
1.6 |
2.0
1.3 |
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 October 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 October 2003 Stock Report:
§ At the end of October, the average market cap for the companies in our universe was $1,098 million, unchanged from the previous month. The median market cap, however, was $239 million at the end of October, nearly 9% higher than it was at the end of September.
§ Market caps have improved significantly over the last 12-month period. At the end of October 2002, the average market cap was $738 million and the median was $100 million. One year later, the average market cap had risen by 49% and the median market cap for the entire group had gained 139%.
§ As another indication that the biotech sector is recovering, only about 2% (6/246) of the stocks were trading below cash at the end of October 2003. Conversely, at the end of October 2002, 22% (52/235) of the companies in our universe had negative technology values.
§ The large-cap stocks – those with market caps of at least $1 billion – had been leading the recovery, but in October they stalled. There are 35 companies in this group (or 14% of the total). They are now lagging the overall average and median in terms of one-year stock performance. Over the last 12 months, stocks of the large-cap companies have increased by 69% in value, on average, much lower than the average increase of 107% for the entire group.
§ The mini-cap group – stocks with market caps of less than $200 million – showed the strongest one-year gains in price performance, with 120% increase.
§ Overall, the climate is much more positive than it was a year ago. The stock prices of 35% of the companies in our universe have more than doubled over the last 12 months. Another 18% of the companies saw their stock prices gain by more than 50%.
§ The top 3 performing groups are Autoimmune, Cancer and Metabolic – with average increases of 168%, 163% and 138%, respectively.
§ Companies are busy with fundraising. In October, 5 companies completed IPOs and 6 raised money in follow-on offerings. As of November 11, 3 more firms had sold stock in follow-ons and 2 more priced shares in IPOs.
§ A number of companies have also started spending money again. Following cutbacks and layoffs over the last 2 years, some firms are perhaps feeling a bit more generous today. Quarterly reports from June and September reveal that the average burn rate is increasing slightly compared to previous quarters.
§ We expect the currently favorable market conditions to continue for a while. The biotech sector is already firmly on track to have its second-best financing year ever: Companies raised slightly more than $13.3 billion through the end of October, already more than the $10.9 billion the sector raised in 2002 and very close to the $14.7 billion raised in 2001.
§ In fact, we may be starting a new cycle: The industry experienced a record number of consolidations and bankruptcies over the last few years, leaving room for new companies to rise to the top.
Satomi Degami, CFA, Recombinant Capital
Jennifer Van Brunt, Editor, Signals
originally published 11/11/2003 |