Biotech equities have sky-rocketed during 2013. As it is evident from the graph presented below, on Friday 3rd of January 2014, the NASDAQ Biotechnology Index closed at 2,373 a 58% rise compared to 1st of January 2013.
Such growth was largely driven by companies that were listed in the stock market post-2007 that have no filed / marketed products, but only clinical trial products. Such stocks also have dramatic potential in stock price growth in case of market entry of their clinical trial products. These companies are shown in the table below (click on the picture to see the numbers clearly):
In terms of past trends for those companies, the IPO offered stock price and the current stock price have been included as well as the stock price growth since IPO. It can be inferred that the majority of these equities have already sky-rocketed, before even any of the products of these companies enter the market (highlighted in green). This is a signal of “trust” of investors in these companies, as potential return on investment in case products enter the market, is huge.
In my view, the companies with slightly negative stock growth with very few late stage products are those to be watched as their future cash flows depend on the status of these products and everybody waits to see if they demonstrate positive clinical trial results (highlighted in yellow).
It should be noted that the analysis above purely depends on the financial performance of these stocks and the number of clinical trial products. It does not say anything about the quality of the companies’ products and the operational performance these companies. Hence, this analysis should, at no circumstance be used as an investment advice.
Disclaimer: The author does not hold stocks of the companies presented in the article or has not any direct / indirect financial interest with these companies.