This summer has been a biotech goldmine. Currently, 24 biotechnology firms have issued initial public offerings (IPOs) to the stock market this year, generating over $1.8 billion for the industry. Eight more companies plan to follow suit before the end of this year.
One of the most recent biotech success stories comes from billionaire Randal J. Kirk, who owns a 60 percent stake in the synthetic bio firm Intrexon (NYSE: XON). On the day of its IPO, Intrexon was oversubscribed by 15-20 percent and sold over 11.5 million shares at $16 a share. The stock rose over 50 percent in a single day and reached a new market cap of $2 billion. Kirk, who has an accumulated net worth of $2.4 billion, added $1.5 billion in total holdings solely from the IPO.
However, skeptics wonder how long this biotech boom will last. Despite a record-setting IPO, Intrexon still has no approved products or medicine on the market and continues to display an insignificant income. Furthermore, Intrexon recorded a substantial loss of $82 million in 2012 and only provided $13.7 million in revenue to offset the losses. Despite Intrexon’s weak numbers, investors still maintain high expectations for the company because no one ever bets against Randal J. Kirk.
Kirk has established himself as the King of Biotech. An entrepreneur with big dreams of changing the world, Kirk first tapped into the biotech cash cow in 2004 when he took his company, New River Pharmaceuticals Inc., public. In 2007, the company won approval from the FDA in the development of Vyvanse, an attention-deficit disorder drug, and shortly thereafter, sold the company for $2.6 billion to the Irish biopharmaceutical giant, Shire Plc (NASDAQ: SHPG).
Building on his success, Kirk then became the majority-holder of Newton, Massachusetts-based Clinical Data Inc., which specializes in anti-depressant drugs. After attaining FDA approval for the development of Viibryd, Kirk sold Clinical Data Inc. to Forest Laboratories, Inc. in 2011 (NYSE: FRX) for $1.2 billion.
Biotechnology produces very few billionaires. The high costs of testing and developing effective drugs, the extensive wait periods to acquire FDA approval and finally issuing the drug to the market has sunk numerous biotech firms in the past. In a society where gratification and satisfaction are instant commodities, early investors often grow impatient with the process and drop out. Nonetheless, Kirk’s track record as a biotech guru and pragmatic businessman has won the trust of investors.
Intrexon, as with several start-up biotechnology companies, operates on a foundation of “precision engineering, statistical modeling and automation at an industrial scale: an approach of the IT engineer to biotech,” according to Peter Geschek, publisher of medfrontiers.com.
Thus far, the 24 biotech companies that have hit the stock market have seen an average share-price increase of 20 percent on opening day.
Contributing to the profit, the FDA approved 39 new drugs in 2012, the largest number of approvals in over a decade. Overall, the current success of biotech has been attributed to the positive reputations of the primary stakeholders behind the companies, as well as the imminent launching of breakthrough drugs to the market.
For the remainder of the year, keep your eye on these biotech firms:
Gilead Inc. (NASDAQ: GILD) based in Foster City, California is due to receive FDA approval for its treatments for the chronic Hepatitis C virus.
Bristol-Myers Squibb Co (NYSE: BMY) is currently the leader of immunotherapy drugs that target cancer cells and contribute to tumor shrinkage. Merrill Lynch believes the immunotherapy industry could reach $35 billion by 2023, which would put Bristol-Myers Squibb’s stock price well over $80 a share.
Also keep an eye on the NASDAQ Biotechnology Index (NASDAQ: IBB), a collection of 124 biotech stocks. The index has risen over 46 percent in the past 12 months.
Rod’s 5 Stocks to Watch:
Fox Factory Holding Corp. (NASDAQ: FOXF)
Teva Pharmaceuticals Ind. Ltd.
(NYSE: TEVA)
Boeing Co
(NYSE: BA)
GameStop
(NYSE: GME)
ViroPharma Inc
(NASDAQ: VPHM)
