The Changing Landscape of Biotech Valuations (ACOR, CBST, MNKD, INCY, SGEN, ITMN, IPXL, MRX, SVNT, VPHM)
The biotech and biohealth universe is changing in size. In 2008 and 2009, partly due to mergers and partly due to market valuations, there had become a surprisingly small number of biotech stocks which had market capitalization rates of more than $1 billion. At one point there were only about 10 or 11 in our universe of biotech stocks that actually had market caps which were very far north of $1 billion, or at least out of the biotech stocks which followed at BioHealth Investor.
We have recently seen Acorda Therapeutics, Inc. (NASDAQ: ACOR), Cubist Pharmaceuticals Inc. (NASDAQ: CBST), MannKind Corporation (NASDAQ: MNKD), Incyte Corporation (NASDAQ: INCY), Seattle Genetics, Inc. (NASDAQ: SGEN), InterMune, Inc. (NASDAQ: ITMN), Impax Laboratories Inc. (NASDAQ: IPXL), and Medicis Pharmaceutical Corporation (NYSE: MRX) either get into or get back into the $1 billion market cap club. And then we have Savient Pharmaceuticals Inc. (NASDAQ: SVNT) and ViroPharma Incorporated (NASDAQ: VPHM) that have been in the club and are currently just short of it.
Due to waves of big emerging drug news and due to strong performance we now have 16 of the biotech and related stocks (at least of those which we cover as pure biotechs) which have market caps north of $2 billion. More importantly, the biotech news flow and he bull market has suddenly helped many stocks rise or at least get back above the $1 billion mark. Many of these had been there before, but the market has helped many new names get back above the $1 billion market capitalization level. And waves of mergers in the last two and three years sort of thinned out the group.
In these we did not take into consideration revenues, earnings, and not even cash. This has largely been news-driven and momentum-driven. Below is a review of each.
Acorda Therapeutics, Inc. (NASDAQ: ACOR), going after multiple sclerosis, spinal cord injury and other nervous system disorders, rejoined the $1 billion market cap club just at the end of this January. At $33.03, it has a market cap of $1.25B, is up 112.82% from its 52-week low and has a 52-week trading range of $15.52 to $33.64.
Cubist Pharmaceuticals Inc. (NASDAQ: CBST) is at $21.75 has a market cap of $1.26B and is up 55.36% from its 52-week low. Its trading range of the trailing year is $14.00 to $22.39. This antibiotic and infection fighter rejoined the $1 billion-plus club back in December.
MannKind Corporation (NASDAQ: MNKD) in diabetes and cancer targets trades at $10.19, has a market cap of $1.15B and is now up a whopping 382.94% from its 52-week low. It has a 52-week trading range of $2.11 to $12.30 and it rejoined the $1+ billion market cap club in January. This stock still falls far short of its 2004 to 2006 highs. This has been above the $1 billion mark on and off, and it regained its $1 billion status in January.
Incyte Corporation (NASDAQ: INCY) overtook its $1 billion level back in December after having been out of the billionaire club since late summer or early fall of 2008. The company targeting oncology, inflammation, and diabetes trades for $11.60, has a market cap of $1.38B and is up 491.84% from its 52-week low. It has a 52-week trading range of $1.96 to $11.74.
Seattle Genetics, Inc. (NASDAQ: SGEN) in cancer and autoimmune targets rejoined the $1 billion club last summer and has bounced in and out of the club since. At $11.78, it has a market cap of $1.18B, is up 68.29% from its 52-week low, and has a 52-week trading range of $7.00 to $14.94.
InterMune, Inc. (NASDAQ: ITMN) just rejoined the $1 billion club this week on news of its lung drug. It has been here before, and some still have ongoing questions for it. That is a different article though. At $23.28 it has $1.07B market cap and is now up 122.14% from its 52-week low and has a 52-week trading range of $10.48 to $25.37.
Impax Laboratories Inc. (NASDAQ: IPXL) is in the development and commercialization of bioequivalent and brand-name pharmaceuticals. The 1-plus year it has been public has been a straight line up and our data is showing that Its $16.48 high close gave this a market cap of $1 billion on the nose.
Medicis Pharmaceutical Corporation (NYSE: MRX) is technically not a biotech, but BioHealth Investor has it in with emerging pharma and biotech stocks for tracking purposes in dermatology and aesthetics. At $23.09 it has a $1.33B Market cap, is up 194.14% from its 52-week low and has a 52-week range of $7.85 – $28.10. Its market cap has been north of $1 billion since the end of last summer.
And then there are two which are very close to the $1 billion club today.
Savient Pharmaceuticals Inc. (NASDAQ: SVNT) has been in the $1 billion club on and off but is not currently in the club. At $13.94, it has a market cap of $928.77M and is actually up 292.68% from its 52-week low. Its 52-week trading range is $3.55 to $16.62.
ViroPharma Incorporated (NASDAQ: VPHM) has been in and out of the $1 billion club on and off. At $12.74, it has a market cap just under the mark of $986.61M yet shares are up 222.53% from its 52-week low. The stock has a 52-week trading range of $3.95 to $13.31.
If you wonder why we focus on this $1 billion level and were dedicating a fixed piece solely to that, this is because $1 billion is a key hurdle for institutional investors. Many institutions cannot or are at least supposed to not invest in companies with market caps under the $1 billion level. In biotech that means those investors miss out on many huge opportunities. But they also frequently miss on most of the biotech zombies and dollar implosions that occur.
Small cap is defined differently from source to source. We generally consider the cut off as being under $1 billion for small cap stocks and then under $100 million for micro-cap stocks. But there are many variations.
- Investopedia.com is at $300 million to $2 billion as small cap;
- InvestorWords.com defines small cap as $250 million to $1 billion;
- The S&P SmallCap 600 Index criteria is $250 million to $1.2 billion.
JON C. OGG
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