July 11, 2016
By Alex Keown, BioSpace.com Breaking News Staff
The market has not been kind to biotech stocks this year, with the S&P Biotech Index down slightly more than 28 percent since the beginning of the year. Not only are smaller companies showing reduced stock growth, but some larger companies are also not generating the returns they could be.
Michael Brush, a MarketWatch columnist, noted that some of the leading biotech companies, such as Amgen and Biogen, are essentially selling for the same amount as some risky biotech startups – despite having strong pipelines and successful drugs on the market. But, although these companies are commanding high dollar amounts per share, when one looks at the strength of the pipelines of these companies, Brush said investors can see a more palatable share price considering the potential revenue.
“If you subtract the value of drugs on the market, the rich pipelines of the best biotech companies around currently sell for the same amount that investors pay for risky biotech IPOs. That is: $10-$20 a share,” Brush wrote.
Shares of Amgen are currently trading at $160.55 per share as of 10:13 a.m. Brush said the company has a “rich pipeline of 34 therapies for just $10. This includes 12 therapies in all-important Phase III development, and nine in Phase II development.” When looking at what the company has coming, as well as drugs it has on the market, including the cholesterol drug Repatha and multiple Phase III drugs, Amgen has a value of about $11 per share for the pipeline.
Shares of Celgene are currently trading at $104.34 per share. Celgene has multiple oncology drugs on the market, including Revlimid. Celgene also has several hundred ongoing clinical trials, Brush said, with many of them in partnerships with other companies, like Juno or Novartis. With all the work being done by Celgene, Brush works the share price out to about $11 per share for its pipeline—which makes the share price a deal when some of those partnerships cross regulatory hurdles and become revenue generators.
Shares of Biogen are currently trading at $251.62 this morning. The Boston-based company has multiple drugs on the market, including the multiple sclerosis drug Tecfidera and the cancer drug Rituxan. In its pipeline Brush spied five late-stage trials that have the potential to become blockbusters for Biogen, each with the potential to generate more than $1 billion in sales. Factoring in the approved drugs and the promising studies, Brush said investors pay about $22 per share for the pipeline, which includes the Alzheimer’s disease drug aducanumab. Brush notes that an analyst with Morningstar believes Biogen’s stock is currently undervalued.
Shares of BioMarin are slightly down this morning, trading at $89.52. Brush notes that BioMarin specializes in orphan drugs, which typically command high prices. The company has a number of approved drugs on the market, as well as 10 in clinical development. With the pipeline and its current share price, Brush said investors will pay $18 per share for the pipeline and its potential.
