Without sound financial management, most companies don't stand a chance of attracting investors and being successful in the long run. Smart companies know that paying close attention and keeping tight controls over the finances helps a company prosper as well as ride out the downturns. One sign that finances are a priority is a sizeable cash reserve. Another element that exemplifies business acumen is keeping long term debt to a minimum. This allows a company to focus on business development rather than repaying debt. With this in mind we developed a list of biotech stocks that have little debt and are highly liquid. Take a look and the data below to see what we found.
The Long Term Debt/Equity Ratio is a variation of the traditional debt-to-equity ratio; this value computes the proportion of a company's long-term debt compared to its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it to others to help analyze the company's risk exposure. Generally, companies that finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios.
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 biotechnology stocks. We then screened for businesses that operate with little to no long term debt (Long Term D/E Ratio<.1). Next, we then 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 be priced higher? Use our screened list as a starting point for your own analysis.
1) Vanda Pharmaceuticals, Inc. (VNDA)
|Long Term Debt/Equity Ratio||0.00|
Vanda Pharmaceuticals Inc., a biopharmaceutical company, engages in the development and commercialization of products for the treatment of central nervous system disorders. It offers Fanapt, an oral formulation of a compound for the acute treatment of schizophrenia in adults. The company is also developing Fanapt, a Phase II clinical trial injectable formulation for the treatment of Schizophrenia. Its products in clinical development also include Tasimelteon, which completed Phase III clinical trials for the treatment of sleep and mood disorders, including circadian rhythm sleep disorders; and Tasimelteon that is in Phase IIb/III trials for the treatment of major depressive disorder. Vanda Pharmaceuticals Inc. also indents to conduct clinical trials to support the use of Tasimelteon as a circadian regulator. The company was incorporated in 2002 and is headquartered in Washington, District of Columbia.
2) 3SBio Inc. (SSRX)
|Long Term Debt/Equity Ratio||0.00|
3SBio Inc., a biotechnology company, engages in the research and development, manufacture, and distribution of pharmaceutical products in the People's Republic of China. Its principal products include EPIAO, an injectable recombinant human erythropoietin to stimulate the production of red blood cells in patients with anemia and to reduce the need for blood transfusions; and TPIAO, a recombinant human thrombopoietin to treat chemotherapy-induced thrombocytopenia. The company also offers Intefen, a recombinant interferon alpha-2a product for the treatment of carcinoma and viral infectious diseases; Inleusin, a recombinant human IL-2 product to treat renal cell carcinoma, metastatic melanoma, and thoratic fluid build-up caused by cancer and tuberculosis; and Iron Sucrose Supplement, a prescription drug for treating anemia, as well as for patients with end-stage renal disease. In addition, its product pipeline comprises a high dosage EPIAO; NuLeusin for metastatic melanoma and metastatic renal cell carcinoma; Feraheme, an in-licensed intravenous iron replacement therapeutic agent used to treat iron deficiency anemia in chronic kidney disease patients and in patients requiring hemodialysis; Voclosporin, an in-licensed calcineurin inhibitor for use in the prevention of organ rejection following transplantation and treatment of autoimmune diseases; and Pegsiticase, a pegylated recombinant uricase for the treatment of refractory gout and tumor lysis syndrome. Further, the company's product portfolio includes NuPIAO, a second-generation EPIAO; a human papilloma virus vaccine for the prevention of cervical cancer; and an anti-TNF monoclonal antibody product candidate for treating rheumatoid arthritis, psoriasis, and other inflammatory diseases. It sells its products directly, as well as through its network of distributors to various healthcare providers, such as hospitals, clinics, and dialysis centers. The company was founded in 1993 and is headquartered in Shenyang, China.
3) Cyclacel Pharmaceuticals, Inc. (CYCC)
|Long Term Debt/Equity Ratio||0.00|
Cyclacel Pharmaceuticals, Inc., a development stage biopharmaceutical company, engages in the development and commercialization of mechanism-targeted drugs to treat human cancers and other serious diseases in the United States. Its product portfolio comprises Sapacitabine, CYC682, a cell cycle modulating nucleoside analog, which is in Phase III clinical trial for the treatment of acute myeloid leukemia in the elderly, as well as in Phase II clinical trials for the treatment of myelodysplastic syndromes, non-small cell lung cancer (NSCLC), and chronic lymphocytic leukemia. The company's products also include Seliciclib, CYC202, a CDK (cyclin dependent kinase) inhibitor that is in Phase IIb clinical trial for the treatment of NSCLC; and in Phase II clinical trials to treat nasopharyngeal cancer, as well as in Phase I clinical trials in combination with Sapacitabine to treat cancer. In addition, the company's products also comprise Cell Cycle Inhibitors, which has completed Phase I trial for the treatment of autoimmune and inflammatory diseases. Its products under preclinical stage include Seliciclib, CYC065, a CDK inhibitor for the treatment of cancer; and Plk1 Inhibitors to treat cancer. Further, the company markets directly Xclair Cream for radiation dermatitis, as well as Numoisyn Liquid and Numoisyn Lozenges for xerostomia. Cyclacel Pharmaceuticals, Inc. was founded in 1992 and is headquartered in Berkeley Heights, New Jersey.
4) Obagi Medical Products, Inc. (OMPI)
|Long Term Debt/Equity Ratio||0.02|
Obagi Medical Products, Inc., a specialty pharmaceutical company, develops, markets, and sells topical aesthetic and therapeutic prescription skin care systems. It offers Obagi Nu-Derm System, including prescription and OTC drugs that are used for the treatment of fine lines, wrinkles, acne, photo damage, hyperpigmentation, melasma, laxity, and skin sallowness; Obagi Condition and Enhance Systems that are used before and after surgical and non-surgical cosmetic procedures; Obagi-C Rx System comprises Vitamin C with 4% hydroquinone system to treat skin conditions resulting from sun damage and the oxidative damage of free radicals; and Professional-C products consisting of Vitamin C serums for the treatment of antioxidant protection, fine lines, wrinkles, and hyperpigmentation. The company also provides ELASTIderm Eye and Dcolletage, which increases the elasticity and skin tone of eyes, face, neckline, and chest; ELASTILash Eyelash Solution that enhances the appearance of thickness and fullness of eyelashes; CLENZIderm M.D. Systems and Tretinoin for treating acne; and Obagi Rosaclear System used for the treatment of rosacea. In addition, it offers Refissa and Blue Peel RADIANCE used for the treatment of fine facial lines, hyperpigmentation, and tactile roughness; Metronidazole used for the treatment of rosacea; Obagi Blue Peel Essential Kit used for the treatment of fine lines, wrinkles, and hyperpigmentation. Further, the company licenses non-prescription product concepts under the Obagi trademark to a Japanese-based pharmaceutical company for sale through consumer distribution channels in Japan. Obagi Medical Products, Inc. sells its products through sales force and distribution partners in the United States, North and Central America, Europe, the Middle East, and Asia to dermatologists, plastic surgeons, and other physicians that are focused on aesthetic and therapeutic skin care. The company was founded in 1988 and is headquartered in Long Beach, California.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 08/29/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. This article was prepared for ZetaKap Media by one of our full-time analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.