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A number of biotechnologies have market prices lower than those available on their balance sheets.
Dreamstime
Mid-February, and the besieged biotech sector shows no real signs of recovery. This may create an opportunity for some stocks.
The
SPDR S&P Biotech Exchange Fund
still down 14.6% this year as of the end of trading on Tuesday, although up 2.4% in the first two weeks of the month. The
iShares Biotechnology ETF,
which also tracks the sector, fell 1.4% in February.
The sentiment of investors in the biotech sector has been so bleak in recent months that a number of biotech companies have market prices that are less than the cash on their balance sheets. So it was for a while: in December a Baron the stock screen singled out eight biotechs that traded below cash.
Two months later, the sector’s performance has not improved. It is noteworthy that many biotechnologies, some of them relatively large, remain in this situation. This indicates both the deep disinterest of investors in biotech stocks this year, and the opportunities that await investors, less bearish in the sector.
If stocks are trading at or below the level of their cash reserves, it means that investors attribute zero value to their drug conveyors or their technology. An investor who buys stocks gets that value for free.
Normally we don’t launch a similar screen in just a couple of months, but the plight of the biotech sector and the potential for benefit seems to be worth highlighting.
Wednesday, Baron looked only at biotech stocks in
SPDR S&P Biotech
ETF (ticker: XBI) and
IShares Biotechnology
ETF (IBB) with a market value of over $ 250 million. Among these stocks, we looked for those that reported cash and short-term investments in the last quarter that were higher than their recent market value.
Our screen returned eight stocks, all of which have fallen at least 28% this year alone. Stocks are there
Atea Pharmaceuticals (AVIR),
biography of the blue bird (BLUE),
Alakos (ALLK),
Dyne Therapeutics (DYN),
Biography of the generation (GBIO),
Gracell Biotechnology (GRCL),
Appendix (ANNX), and
BioAtla (BCAB).
| Company / Ticker | Last price | Market value (millions) | Cash and short-term investments (millions) | Change since the beginning of the year (%) |
|---|---|---|---|---|
| Atea Pharmaceuticals / AVIR | $ 6.42 | $ 533.5 | $ 839.7 | -28.2 |
| Bluebird BIO / BLUE | $ 6.78 | $ 475.3 | $ 777.6 | -32.1 |
| Alakos / ALLK | $ 6.86 | $ 372.6 | $ 505.6 | -29.9 |
| Dyne Therapeutics / DYN | $ 7.44 | $ 383.4 | $ 407.5 | -37.4 |
| Generation Bio / GBIO | $ 4.94 | $ 281.1 | $ 398.4 | -30.2 |
| Gracell / GRCL Biotechnology | $ 3.91 | $ 263.9 | $ 302.9 | -35.3 |
| Annexon / ANNX | $ 6.99 | $ 268.2 | $ 271.4 | -39.2 |
| BioAtla / BCAB | $ 7.01 | $ 258.2 | $ 269.9 | -64.3 |
Source: FactSet
The most famous in the group is probably Bluebird, once a pioneer of gene therapy at a high level. Its share price has fallen 64% over the past 12 months and 89% over the past two years.
However, due to the recent spin-off Bluebird is not trading as much below cash as it seems. Although the recent market share price of $ 475.3 million is well below the cash and short-term investment of $ 777.6 million reported at the end of September, the company has since dedicated its cancer programs to a new one. a firm called
2seventy bio (TVST).
In a November press release, Bluebird said that after the partition, it had “limited cash, cash and cash equivalents, and the balance of commodity securities is approximately $ 518.5 million.” This is much closer to the current market value of stocks, and suggests that views on this may not be as pessimistic as for other stocks on the screen.
Another well-known name is Atea, which developed the antiviral drug Covid-19, which achieved disappointing results in a Phase 2 trial this fall. The company recently announced a new focus on the hepatitis C virus, but analysts say there is a way.
“As Atea restructures its strategy until 2022, many moving parts can make it harder to attract investors, and a slow catalyst path can complicate the situation; so we remain Market Perform, ”SVB Leerink analyst Raana Ruiz wrote in a January 12 note.
Email Josh Nathan-Kazis at josh.nathan-kazis@barrons.com
.