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Here we present 4 biotech companies that are “cash-comfortable”, with enough cash to cover more than 8 quarters of their average quarterly operating expenses. These four stocks are also seeing net buying from both institutional and mutual fund holders over the current and prior quarters.

For these companies we calculated the average quarterly operating expense over the last four quarters, and compared it with current cash holdings. All four companies listed have more than 8x the cash for their avg. quarterly operating expense, translating into coverage of more than 8 quarters of avg. operating expenses without the need to generate revenue.

Do you think these names can continue to attract institutional flows? We included full sentiment analyses, a recap of recent developments for the companies, as well as the data we mentioned above.

Cash and operating expense data sourced from Google Finance, institutional and mutual fund data sourced from Fidelity.



List sorted by current cash holdings divided by avg. quarterly operating expense.

1. Targacept, Inc. (NASDAQ:TRGT): Biotechnology Industry. Market cap of $723.76M. Net institutional shares bought during current quarter at 4.6M vs. 140.6K net shares bought during previous quarter. Net mutual fund shares bought during current quarter at 531.2K vs. 527.0K net shares bought during the previous quarter.

Current cash holdings at $252.51M vs. average quarterly operating expenses over the last four quarters at $18.15M. Cash/Avg. Quarterly Operating Expenses at 13.9, i.e. the company can go 13.9 quarters without generating revenue and still cover the average quarterly operating costs.

Recent developments: Announced results from a Phase II trial of TC-5619 for treating adults with ADHD, finding it did not meet its primary efficacy outcome measure (Mar. 2011); however, TC-5619 gave positive results from a separate Phase II trial for cognitive dysfunction in schizophrenia (Jan. 2011). Announced FY11 revenue guidance below analysts’ estimates (Feb. 2011).

2. PROLOR Biotech, Inc. (NYSEMKT:PBTH): Biotechnology Industry. Market cap of $320.44M. Net institutional shares bought during current quarter at 1.4M vs. 333.5K net shares bought during previous quarter. Net mutual fund shares bought during current quarter at 1.1M vs. 33.0K net shares bought during the previous quarter.

Current cash holdings at $25.91M vs. average quarterly operating expenses over the last four quarters at $1.92M. Cash/Avg. Quarterly Operating Expenses at 13.5, i.e. the company can go 13.5 quarters without generating revenue and still cover the average quarterly operating costs.

Recent developments: Announced positive pre-clinical results from a comparative study of its longer-acting version of hemophilia drug Factor IX (Feb. 2011).

3. BioTime, Inc. Common Stock (NYSEMKT:BTX): Biotechnology Industry. Market cap of $359.80M. Net institutional shares bought during current quarter at 920.5K vs. 1.4M net shares bought during previous quarter. Net mutual fund shares bought during current quarter at 202.3K vs. 243.5K net shares bought during the previous quarter.

Current cash holdings at $33.32M vs. average quarterly operating expenses over the last four quarters at $3.38M. Cash/Avg. Quarterly Operating Expenses at 9.9, i.e. the company can go 9.9 quarters without generating revenue and still cover the average quarterly operating costs.

Recent developments: Announced closing of merger of Glycosan BioSystems, Inc. with wholly-owned subsidiary OrthoCyte Corp. (Mar. 2011). Announced the company had acquired all assets of Cell Targeting, Inc., whose technology uses peptides that can adhere to diseased tissues to potentially revolutionize cell therapy.

4. Oncolytics Biotech Inc. (NASDAQ:ONCY): Biotechnology Industry. Market cap of $409.0M. Net institutional shares bought during current quarter at 8.1M vs. 713.9K net shares bought during previous quarter. Net mutual fund shares bought during current quarter at 16.5K vs. 39.6K net shares bought during the previous quarter.

Current cash holdings at $42.91M vs. average quarterly operating expenses over the last four quarters at $5.01M. Cash/Avg. Quarterly Operating Expenses at 8.6, i.e. the company can go 8.6 quarters without generating revenue and still cover the average quarterly operating costs.

Recent developments: Announced positive results for the first part of its Phase II trial for treating advanced pancreatic cancer with intravenous REOLYSIN in combination with gemcitabine (Feb. 2011). Announced opening of enrollment for the company’s Phase I trial of REOLYSIN with FOLFIRI for treating colorectal cancer (Jan. 2011).

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 4 Biotech Companies With a 2-Year Cash Cushion, Being Snapped Up by the Smart Money