Deep Dive: These are the most profitable Nasdaq biotech companies
The Nasdaq Composite Index has nearly doubled since the end of 2011, led by its riskiest sector: biotechnology.
But biotech companies vary more than most in other industries. Some have no hopes of ever making money. And others are backed by products that are established in the marketplace and are quite profitable.
The Nasdaq Biotechnology Index NBI, +0.40% has risen 227% since the end of 2011 through Wednesday, compared with a 91% return for the broader Nasdaq Composite Index COMP, +0.42% which is within 4 percentage points of its all-time intraday high of 5,132.52, set in March 2000.
FactSet
The Nasdaq Composite Index has nearly doubled since the end of 2011, and the Nasdaq Biotechnology Index has more than tripled.
“Looking at the simple average of all the individual biotechnology companies on the Nasdaq, the group is higher by [roughly] 300% since 2011. However, if we exclude the biotechnology companies … the simple average of the rest of the Nasdaq listed companies are up on average about 75%,” according to Myles Clouston, Nasdaq’s senior director of advisory services.
So there’s no question that this rally has been driven by biotech.
But how risky is it to play this sector?
The following chart, showing this year’s best-performing Nasdaq biotech stocks, illustrates why it’s important to be very careful when buying:
Company
Ticker
Total return – YTD
Total return – 2014
Total return – 3 years
Total return – 5 years
Capnia Inc.
CAPN, +9.58%
327%
N/A
N/A
N/A
Genetic Technologies Ltd. Sponsored ADR
GENE, +1.87%
233%
-73%
-68%
12%
Cellular Biomedicine Group Inc.
CBMG, +1.69%
129%
153%
310%
195%
Semler Scientific Inc.
SMLR, -0.23%
117%
N/A
N/A
N/A
Curis Inc
CRIS, -0.32%
111%
-47%
-30%
17%
Coherus Biosciences Inc.
CHRS, +1.68%
97%
N/A
N/.A
N/A
Exelixis Inc.
EXEL, +8.92%
87%
-77%
-53%
-58%
Stereotaxis Inc.
STXS, -7.60%
78%
-59%
-65%
-94%
Neurocrine Biosciences Inc.
NBIX, +1.16%
77%
139%
388%
1,423%
Echo Therapeutics Inc.
ECTE, +4.78%
70%
-57%
-87%
-87%
Total returns assume reinvestment of dividends. Sources: Nasdaq and FactSet
Among this year’s 10 best performers, eight were publicly traded for all of 2014 and five of those saw huge losses for the year. Five of those eight also have suffered painful losses over the past three years.
Since most biotech firms have so much riding on trial results and government approvals of new medications or treatments, “it’s all about a binary event,” according to Clouston. And we all know how risky it can be to hope that a stock will be driven higher by positive headlines.
Then again, Clouston said during an interview on Thursday that compared with the heady days of early 2000, there is now “a much bigger bench of companies that have actual products and fundamentals that support the appreciation.”
Credit:
Deep Dive: These are the most profitable Nasdaq biotech companies
