4 Cash-Rich Biotechs Smart Money Loves

Institutional buyers have been adding shares of these four biotechs, each with big stockpiles of cash to tide them over while their latest drugs and technologies are in trial and developmental stages.

Here we present four biotech companies that are “cash-comfortable.” These companies have enough cash to cover more than eight 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 eight times the cash for their average quarterly operating expense, translating into coverage of more than eight quarters of average 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 average quarterly operating expense.

Targacept, Inc. (TRGT) has a market cap of $723.76 million and net institutional shares bought during current quarter were 4.6 million versus 140,600 net shares bought during the previous quarter.

Net mutual fund shares bought during the current quarter are at 531,200 versus 527,000 net shares bought during the previous quarter.

chart
Click to Enlarge

Current cash holdings are around $252.51 million versus average quarterly operating expenses over the last four quarters at $18.15 million. The cash-to-average-quarterly-operating-expenses ratio is 13.9, i.e. the company can go 13.9 quarters without generating revenue and still cover the average quarterly operating costs.

Recent Developments: TRGT 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). The company also announced fiscal year (FY) 2011 revenue guidance below analysts’ estimates (Feb. 2011).

PROLOR Biotech, Inc. (PBTH) has a market cap of $320.44 million and net institutional shares bought during the current quarter are at 1.4 million versus 333,500 net shares bought during the previous quarter.

Net mutual fund shares bought during current quarter are at 1.1 million versus 33,000 net shares bought during the previous quarter.

chart
Click to Enlarge

Current cash holdings are at $25.91 million versus average quarterly operating expenses over the last four quarters at $1.92 million. The cash-to-average-quarterly-operating-expenses ratio is 13.5, i.e. the company can go 13.5 quarters without generating revenue and still cover the average quarterly operating costs.

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

Article Continues on Page 2

|pagebreak|

BioTime, Inc. (BTX) has a market cap of $359.80 million and net institutional shares bought during the current quarter come in at 920,500 versus 1.4 million net shares bought during the previous quarter.

Net mutual fund shares bought during the current quarter are at 202,300 versus 243,500 net shares bought during the previous quarter.

chart
Click to Enlarge

Current cash holdings are at $33.32 million versus average quarterly operating expenses over the last four quarters at $3.38 million. The cash-to-average-quarterly-operating-expenses ratio comes in 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.

Oncolytics Biotech Inc. (ONCY) has a market cap of $409 million and net institutional shares bought during the current quarter are at 8.1 million versus 713,900 net shares bought during the previous quarter.

Net mutual fund shares bought during the current quarter are at 16,500 versus 39,600 net shares bought during the previous quarter.

chart
Click to Enlarge

Current cash holdings are at $42.91 million versus average quarterly operating expenses over the last four quarters of $5.01 million. The cash-to-average-quarterly-operating-expenses ratio is 8.6, i.e. the company can go 8.6 quarters without generating revenue and still cover the average quarterly operating costs.

Recent Developments: The company recently 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). It also announced opening of enrollment for the company’s Phase I trial of REOLYSIN with FOLFIRI for treating colorectal cancer (Jan. 2011).

By the Staff at Kapitall.com

Related: See “Bottom Fishing in Biotech” to discover two sector leaders whose charts show attractive buy set-ups now.