Date: Mar 03, 2014 Author: Don Seiffert Source: bizjournals (
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Don Seiffert
Boston Business Journal
In case you need another sign that biotech stocks continue to blow away those in pretty much every other type of industry, Bespoke Investment Group has provided one that highlights three local companies.
Bespoke last week listed the top 25 stock price gainers since Jan. 1 among all small-cap companies (all of which have market capitalizations of less than $6 billion) on the Russell 2000 index. And wouldn't you know it: 18 of them (including nine of the top 10) on the list are biotech or drug-discovery firms.
Three of those companies — Synageva BioPharma, Karyopharm Therapeutics and Epizyme — are from the Boston area. Two are working on cancer drugs, one is aiming at rare diseases. Two went public last year, one in 2011. The main commonality between them seems to be that they've all had the good fortune to have reported good data in the past few months.
Of the three, stock in Synageva (Nasdaq: GEVA) has appreciated the most in the past two months — nearly 80 percent — ranking it eighth on the list of biggest year-to-date gainers. The company's drug aimed at a rare disease that causes liver damage is in a late-stage trial that recently finished enrolling patients. Since it went public in 2011, the Lexington, Mass., firm's stock has increased a whopping 800 percent.
The other two firms on the list are both oncology drug companies which went public in the past 12 months. Karyopharm (Nasdaq: KPTI) increased 72 percent since Jan. 1, giving it a rank of 12. And Epizyme (Nasdaq: EPZM) went up 62 percent year-to-date, coming in at number 14.
It's not too surprising considering that the Nasdaq Biotech Index is up 16 percent for the year. That's on top of a 66 percent increase during 2013.
But there's one additional item to add to the list of things that's probably no surprise to anyone involved in biotechnology. That's another analyst waning that the current sky-high valuations are tough to justify. Forbes cites Paul Karos, senior portfolio manager at WhiteBox Advisors, saying last month that biotechs are inflating stock prices in the health care sector.
"Some of those valuations are going to be hard to justify," Karos said. "If you're in small-cap health care, you need to be in a likely takeout candidate or (companies with) a significant development in the business."
Sound familiar? Maybe that's because just last month, another analyst quoted on this blog said basically the same thing, and last October, yet another one echoed the same sentiment. Perhaps the big surprise here is that biotech investors are still ignoring the warnings of a bubble.
