Some investors consider investing in biotech too risky. But focusing on large cap stocks and those that have ample cash reserves are some ways for reducing exposure. When a company is at the large cap level, it has already passed through several rounds of growth and weathered market upheavals. Additionally, having a high level of liquidity is a key asset when contemplating biotech stocks. Cash allows these companies to continue research and development, make strategic acquisitions, and expand to new territories. Our list today of large cap biotechnology stocks all have strong cash reserves and have recent 'Buy' ratings from industry analysts. We think you will be intrigued by our findings.
The Current Ratio is a liquidity ratio used to determine a company's financial health. The metric illustrates how easily a firm can pay back its short obligations all at once through current assets. A company that has a current ratio of one or less is generally a liquidity red flag. Now this doesn't mean the company will go bankrupt tomorrow, but it also doesn't bode well for the company, and may indicate that it could have an issue paying back upcoming obligations.
The Quick Ratio measures a company's ability to use its cash or assets to extinguish its current liabilities immediately. Quick assets include assets that presumably can be converted to cash at close to their book values. A company with a Quick Ratio of less than 1 cannot currently pay back its current liabilities. The quick ratio is more conservative than the Current Ratio because it excludes inventory from current assets, since some companies have difficulty turning their inventory into cash. If short-term obligations need to be paid off immediately, sometimes the current ratio would overestimate a company's short-term financial strength. In general, the higher the ratio, the greater the company's liquidity (i.e., the better able to meet current obligations using liquid assets).
We first looked for large cap biotechnology stocks. We next screened for businesses that analysts rate as "Buy" (2 < mean recommendation < 3). We then looked for businesses with a large amount of cash on hand (Current Ratio>2)(Quick Ratio>2).
Do you think these large-cap stocks will go up in price? Use our screened list as a starting point for your own analysis.
1) Amgen Inc. (AMGN)
Amgen Inc. has an Analysts' Rating of 2.40, a Current Ratio of 3.68, and a Quick Ratio of 3.36. The short interest was 1.62% as of 08/17/2012. Amgen Inc., a biotechnology medicines company, discovers, develops, manufactures, and markets human therapeutics based on advances in cellular and molecular biology for grievous illnesses primarily in the United States, Europe, and Canada. Its principal products include Neulasta and NEUPOGEN to stimulate the production of neutrophils, which is type of white blood cell that helps the body fight infections; Enbrel, an inhibitor of tumor necrosis factor that plays a role in the body's response to inflammatory diseases; and Aranesp and EPOGEN erythropoiesis-stimulating agents, which stimulate the production of red blood cells.
The company also markets other products comprising Sensipar/Mimpara, a small molecule calcimimetic that lowers serum calcium levels; Vectibix, a monoclonal antibody that binds specifically to the epidermal growth factor receptor; and Nplate, a thrombopoietin (TPO) receptor agonist that mimics endogenous TPO, the primary driver of platelet production, as well as offers Prolia and XGEVA denosumab, which are human monoclonal antibodies that specifically targets RANKL, an essential regulator of osteoclasts.
2) Celgene Corporation (CELG)
Celgene Corporation has an Analysts' Rating of 1.70, a Current Ratio of 2.93, and a Quick Ratio of 2.77. The short interest was 1.47% as of 08/17/2012. Celgene Corporation, a biopharmaceutical company, discovers, develops, and commercializes various therapies to treat cancer and immune-inflammatory related diseases primarily in the United States and Europe.
The company's commercial stage products include REVLIMID, an oral immunomodulatory drug for the treatment of patients with multiple myeloma and myelodysplastic syndromes (MDS); VIDAZA, a pyrimidine nucleoside analog to treat various subtypes MDS and acute myeloid leukemia; and THALOMID for patients with multiple myeloma, and for the prevention and suppression of the cutaneous manifestation of erythema nodosum leprosum recurrence. It also offers ABRAXANE to treat metastatic breast cancer; and ISTODAX for the treatment of cutaneous and peripheral T-cell lymphoma.
3) Alexion Pharmaceuticals, Inc. (ALXN)
Alexion Pharmaceuticals, Inc. has an Analysts' Rating of 1.90, a Current Ratio of 3.40, and a Quick Ratio of 3.15. The short interest was 3.08% as of 08/17/2012. Alexion Pharmaceuticals, Inc., a biopharmaceutical company, engages in the innovation, development, and commercialization of life-transforming therapeutic products for treating patients with severe and ultra-rare disorders in the United States, Europe, Latin America, Japan, and the Asia Pacific.
It focuses on developing products for the treatment of diseases in the areas of hematology, nephrology, neurology, metabolic disorders, oncology, and ophthalmology. The company offers Soliris(eculizumab), a therapeutic product for the treatment of patients with paroxysmal nocturnal hemoglobinuria (PNH), a blood disorder; and atypical hemolytic uremic syndrome (aHUS), an ultra-rare and life-threatening genetic disease.
4) Regeneron Pharmaceuticals, Inc. (REGN)
Regeneron Pharmaceuticals, Inc. has an Analysts' Rating of 2.10, a Current Ratio of 4.20, and a Quick Ratio of 4.06. The short interest was 6.75% as of 08/17/2012. Regeneron Pharmaceuticals, Inc., a biopharmaceutical company, discovers, develops, and commercializes medicines for the treatment of serious medical conditions in the United States.
The company's commercial products include EYLEA (aflibercept) Injection for the treatment of neovascular age-related macular degeneration; and ARCALYST (rilonacept) injection for subcutaneous use for the treatment of cryopyrin-associated periodic syndromes, including familial cold auto-inflammatory syndrome and muckle-wells syndrome in adults and children. Its products under Phase III clinical development stage consists of EYLEA for the treatment of serious eye diseases; ZALTRAP (Aflibercept), which is developed in oncology; and ARCALYST for the prevention of gout flares in patients initiating uric acid-lowering treatment.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.