Applying scientific and technical advances in life science to develop commercial products, biotechnology companies have remained on the market’s radar and considered as a quasi-lottery to earn big bucks. However, the success ratio of these companies has generally remained low as most of them are unprofitable. In today’s article, I have identified the five biotechnology stocks where taking on the risk is worth it right now.
Spectrum Pharmaceuticals Inc. (SPPI) is an American biotechnology company with presence in North America and Europe and focus on drugs for treatments in oncology and urology. The company has experienced exponential revenue growth during the last five years (5 year CAGR: 164%) with major thrust coming from 2008 when its flagship drug, Fusilev, was approved by the United States Food and Drug Administration. However, SPPI’s bottom line has remained below the break-even level since its incorporation, due to increasing product and brand development costs.
Then again, 2011 is anticipated to be the first year of profitability for the company with an expected number in excess of $ 50 million against almost the same level of loss in 2010. The underlying investment characteristics of most of the biotechnology companies don’t allow earnings as the inflection point for cross-comparison. In the backdrop of continuously rising revenues and start of the “profitability” era from 2011, current price-to-sales and price-to-book ratios of 3.9 times and 4.0 times for the company makes it dirt cheap and extremely attractive against its comparable peers like Inhibitex, Inc. (INHX) and Idenix Pharmaceuticals Inc. (IDIX) as these companies command market capitalizations close to SPPI despite heavily lower sales and even negative equity (in case of IDIX). To continue reading, click here