In the lengthy and expensive U.S. regulatory approval process, just 16 per cent of drugs make it through to market. In the meantime, many biotech firms are keeping the lights on by issuing shares and steadily diluting the holdings of existing shareholders, Grant’s says.
Among the companies the newsletter spotlights: Shares of Sangamo Biosciences have returned 258 per cent since the start of 2012, yet the company lost $22.3-million last year on revenue of $21.7-million derived from research grants and partnership agreements. Sangamo hasn’t brought a single drug to market in its 18-year existence, and not a single insider has bought a share since 2010, Grant’s notes.
“A would-be investor in a biotech company, short of arming himself or herself with a degree in medicine, could do worse than to watch what the insiders do, instead of what they say,” the newsletter advises.
Shares of Isis Pharmaceuticals, meanwhile, have returned 210 per cent since the beginning of last year. The company has 28 drugs in the pipeline but has reported a pretax loss in every year since its IPO in 1991. Last year, Isis lost $65-million on revenue of $102-million. No insider has bought a share of the company since 2006, and the chief executive officer unloaded 30,000 shares last week at a price of $22.16, Grant’s writes.