Some investors consider investing in biotechnology to be too risky. But focusing on biotechs that have ample cash reserves is one way to mitigate that exposure. Having a high level of liquidity allows a company to continue research and development, make strategic acquisitions, and expand to new territories, not to mention withstand market upheavals. Today, the biotechnology stocks we chose to evaluate all have strong cash reserves and recent "Buy" ratings from industry analysts, indicating that they have much more than cash reserves going for them. Use our findings as a starting point for your own analysis.
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, 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 biotechnology stocks. We then looked for businesses that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3). We next screened for businesses that have a substantial amount of cash on hand (Current Ratio>2)(Quick Ratio>2). We did not screen out any market caps.
Do you think these stocks should have higher valuations? Please use our list to assist with your own analysis.
1) Theravance Inc. (THRX)
Theravance, Inc., a biopharmaceutical company, engages in the discovery, development, and commercialization of small molecule medicines primarily for therapeutic areas of respiratory diseases, bacterial infections, and central nervous system (CNS)/pain. The company offers VIBATIV, a bactericidal injectable antibiotic for the treatment of Gram-positive infections. Its principal development programs with GlaxoSmithKline plc include RELOVAIR, which has completed Phase 3 clinical studies for the treatment of patients with chronic obstructive pulmonary disease (COPD) or asthma; the LAMA/LABA combination, a Phase 3 program for patients with COPD; and the Bifunctional Muscarinic Antagonist-Beta2 Agonist (MABA) program that has completed Phase 2b study for the treatment of COPD. The company's principal development programs also comprise the Peripheral Mu-Opioid Receptor Antagonist (PMA) program for the TD-1211 mu-opioid receptor designed to alleviate gastrointestinal side effects of opioid therapy without affecting analgesia. In addition, it develops TD-4208 that has completed Phase 2a single-dose COPD study; TD-1792, an antibiotic under clinical-stage for the treatment of serious infections caused by Gram-positive bacteria; MARIN program with compound TD-9855 under Phase 2 study for the treatment of attention-deficit/hyperactivity disorder; TD-5108, which has completed Phase 1 study for the treatment of Alzheimer's disease, and completed Phase 2 proof-of-concept study for the treatment of chronic idiopathic constipation(CIC); and TD-8954 that has completed single- and multiple-ascending dose Phase 1 studies for treatment of CIC. The company was formerly known as Advanced Medicine, Inc. and changed its name to Theravance, Inc. in April 2002. Theravance, Inc. was founded in 1996 and is headquartered in South San Francisco, California.
2) Protalix BioTherapeutics, Inc. (PLX)
Protalix BioTherapeutics, Inc., a biopharmaceutical company, through Protalix Ltd., focuses on the development and commercialization of recombinant therapeutic proteins based on its proprietary ProCellEx protein expression system in the United States. The company's lead product candidate includes taliglucerase alfa, a proprietary plant cell expressed recombinant Glucocerebrosidase enzyme for the treatment of Gaucher disease, which has completed Phase III clinical trial. It is also developing PRX-102, a therapeutic protein candidate for the treatment of Fabry disease, a rare genetic lysosomal disorder in humans; PRX-105, a plant cell expressed pegylated recombinant acetylcholinesterase product candidate for biodefense and other indications; and PRX-106, a plant cell expressed recombinant fusion protein made from the soluble form of the human TNF receptor and an antibody portion, which is developed as a treatment of various immune diseases, such as rheumatoid arthritis, juvenile idiopathic arthritis, spondylitis, psoriatic arthritis, and plaque psoriasis. The company's product pipeline also includes an orally-administered glucocerebrosidase enzyme for the treatment of Gaucher disease patients utilizing oral delivery of the recombinant enzyme produced within carrot cells; and two additional undisclosed therapeutic proteins, which are being evaluated in animal studies. It has a collaboration and licensing agreement with Teva Pharmaceutical Industries Ltd. to develop and manufacture two proteins using its ProCellEx protein expression system; and a research and license agreement with the Yeda Research and Development Company Limited to design Glucocerebrosidase for the treatment of Gaucher disease. Protalix BioTherapeutics, Inc. was founded in 1993 and is based in Carmiel, Israel.
3) GTX Inc. (GTXI)
GTX, Inc., a biopharmaceutical company, engages in the discovery, development, and commercialization of small molecules for the treatment of cancer, cancer supportive care, and other serious medical conditions. The company markets FARESTON (toremifene citrate) 60 mg tablets for the treatment of metastatic breast cancer in postmenopausal women primarily through wholesale drug distributors in the United States. It is also developing Enobosarm, an anabolic agent, which is in Phase III clinical trials for the prevention and treatment of muscle wasting in patients with non-small cell lung cancer. The company's preclinical stage products include inhibitors of steroid biosynthetic enzymes, anticancer therapies, estrogen receptor beta agonists, and other novel compounds for the treatment of cancer, metabolic diseases, ophthalmic diseases, psoriasis, and/or pain. GTX, Inc. was founded in 1997 and is headquartered Memphis, Tennessee.
4) Illumina Inc. (ILMN)
Illumina, Inc. develops, manufactures, and markets life science tools and integrated systems for the analysis of genetic variation and biological function in North America, Europe, Latin America, the Asia-Pacific, the Middle East, and South Africa. Its sequencing platforms include HiSeq 2000, an instrument for high-throughput sequencing using sequencing-by-synthesis (SBS) technology; HiSeq 1000 that accommodates lower throughput needs; MiSeq, a personal sequencing system that offers sequencing applications in a compact and economical instrument for individual researchers; and Genome Analyzer IIx. The company's sequencing/array combination platforms comprise HiScanSQ that combines SBS technology and HiScan microarray analysis instrumentation into one system. Its array platforms consist of HiScan and iScan systems that are array scanners, which support the imaging of its array-based genetic analysis products; and BeadXpress Readers for small and high-throughput laboratories. The company also offers various sample preparation and sequencing kits, such as standard sequencing kits; Infinium Assay; Paired-End Genomic DNA Sample Prep; and TruSeq SBS sequencing kits, as well as library preparation kits. In addition, it provides InfiniumHD Whole-Genome BeadChips, which are multi-sample DNA analysis microarrays; HumanOmni5-Quad, HumanOmni2.5, and HumanOmni1S BeadChips; agriculturally relevant genome panels that comprise the BovineHD and MaizeSNP50 BeadChips; and iSelect Custom Genotyping BeadChips. Further, it offers Eco Real-Time PCR System that provides qPCR results; and sequencing and genotyping services. The company serves genomic research centers, academic institutions, government laboratories, and clinical research organizations, as well as pharmaceutical, biotechnology, agri-genomics, and consumer genomics companies. It sells its products directly and through distributors. The company was founded in 1998 and is headquartered in San Diego, California.
5) Halozyme Therapeutics, Inc. (HALO)
Halozyme Therapeutics, Inc., a biopharmaceutical company, engages in the research, development, and commercialization of recombinant human enzymes that transiently modify tissue under the skin to facilitate injection of other therapies or correct diseased tissue structures for clinical benefits. The company primarily offers recombinant human hyaluronidase, an enzyme that degrades hyaluronan, which is a matrix component in the skin, and facilitates the dispersion and absorption of drugs and fluids. Its portfolio of products and product candidates are developed based principally on intellectual property covering the family of human enzymes known as hyaluronidases. The company also provides Ultrafast Insulin program, a Phase II clinical trial product for the treatment of diabetes mellitus; and Enhanze technology, a proprietary drug delivery platform for subcutaneous delivery of injectable biologics, such as monoclonal antibodies and other therapeutic molecules, as well as small molecules and fluids. It offers PEGPH20, a new molecular entity that is in Phase I trial for the systemic treatment of tumors; and HTI-501, a recombinant human proteinase, which is in Phase 1/2 clinical trial used for the treatment of edematous fibrosclerotic panniculopathy (cellulite). The company has collaborative partnerships with F. Hoffmann-La Roche, Ltd and Hoffmann-La Roche, Inc.; ViroPharma Incorporated; and Intrexon Corporation to apply Enhanze technology to the partners' biological therapeutic compounds. Halozyme Therapeutics, Inc. was founded in 1998 and is based in San Diego, California.
6) Cytori Therapeutics, Inc. (CYTX)
Cytori Therapeutics, Inc. engages in developing cell therapies based on autologous adipose-derived stem and regenerative cells (ADRCs) to treat cardiovascular disease and repair soft tissue defects. It offers Celution 800 System on a pre-launch basis, which is used for certain soft tissue procedures, including breast reconstruction; sells StemSource cell banking line, encompassing three product configurations, to hospitals, plastic surgery clinics, tissue banks, and stem cell banking companies; and commercializes Puregraft System that is designed to streamline the fat graft preparation process by selectively washing and filtering the tissue to remove contaminants in a closed sterile field. The company also offers a range of ancillary products designed to optimize tissue harvest and graft delivery, including Celbrush, a surgical instrument for the precise delivery of micro droplets that is used by reconstructive and cosmetic surgeons for autologous fat grafting and cell-enriched fat grafting procedures; and instrumentation to optimize tissue harvest. In addition, it engages in clinical trails for the development of a pipeline of therapies by using ADRCs for the treatment of cardiovascular diseases, such as heart failure and heart attacks. The company markets its systems, instrumentations, and consumables directly, as well as through a network of distributors to surgeons and hospitals worldwide. Cytori Therapeutics, Inc. has a strategic development and manufacturing joint venture agreement, and other related agreements with Olympus Corporation. The company was founded in 1996 and is headquartered in San Diego, California.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 08/23/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.