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TMFHelical (99.09)

Biotech Toolmakers to Benefit from Obama

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January 28, 2009 – Comments (4)

 

By all indications, the stimulus package being voted on today includes significant increases for NIH funding.

http://www.genomeweb.com/node/910396 (might require registration).

"The Federal economic stimulus package that awaits both Congress and newly-inaugurated President Barack Obama includes billions of dollars in new funding for the National Institutes of Health and other research agencies, as well as a major funding plan for a health information technology program.

The stimulus package, which currently is in the US House of Representatives, offers $3.5 billion to NIH, $460 million for renovation at the US Centers for Disease Control and Prevention, a total of $20 billion to back health information technology initiatives, and billions for other agencies that fund biomedical research and genomics, according to the House Ways and Means and Appropriations Committees.
...
In its current draft, the package seeks $1.5 billion to fund NIH research and $500 million to implement a repairs and improvement plan for NIH campuses. Another $1.5 billion in the bill would go through NIH to renovate university research facilities and “help them compete for biomedical research grants.”

NIH funding has seen only very modest funding increases over the past few years.  Who benefits from this?  Generally the pick and shovel providers of biotechnology, whose sales into the research committee are significantly influenced by levels of acedemic spending.  Here is a list from an index maintained by GenomeWeb

ACCL Accelrys
AXK Accelr8
AFFX Affymetrix
A Agilent
BEC Beckman
BDX Becton Dickinson
BIO Bio-Rad
BRKR Bruker
CALP Caliper
CRA Celera
CPHD Cepheid
CLDA Clinical Data
CBMX CombiMatrix
CGEN Compugen
DCGN DeCode Genetics
GHDX Genomic Health
GPRO Gen-Probe
HLCS Helicos BioSciences
ILMN Illumina
LIFE Life Technologies
LMNX Luminex
MDZ MDS
MIL Millipore
MGRM Monogram Biosciences
MYGN Myriad Genetics
NGEN Nanogen
NSPH Nanosphere
ORCH Orchid Cellmark
PKI PerkinElmer
PBIO Pressure BioSciences
QGEN Qiagen
ROSG Rosetta Genomics
SQNM Sequenom
SIAL Sigma-Aldrich
TMO Thermo
WAT Waters

I have many of these in my CAPS port already, as I think this is the best way to invest in biotechnology (slow and steady rather than shoot for the moon).  Time to add a few more.  I want to keep my active picks ~50, so this is where I'll seek additions.  Could be a time before these pay off though, and massive pharma cutbacks haven't helped the industry (though the outsourcing movement arguably does).

 TMFHelical

Community Analyst Team

4 Comments – Post Your Own

#1) On January 28, 2009 at 10:27 AM, kali77 (99.58) wrote:

Nice list. Thanks.

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#2) On January 28, 2009 at 4:36 PM, Tastylunch (29.45) wrote:

Helical this is a bit OT but semi related I wonder if I may trouble you for an opinion on a company I recently came across

No analysts follow it yet as it's new addition to the AMEX

Ticker symbol LZR (emergent group inc.) what they do is they rent medical equipment and techinicians to hospitals and surgery centers.

They have pretty impressive revenue growth numbers(last quarter was up 43% yoy) and the share price momo has been great but I had a couple concerns one they have a very very high payout ration on their dividend and two they have about a 0.5 debt to equity ratio.

My other big concern is I noticed it has gotten a lot of message board hyping. Normally that's enough for me to say no thanks, but this one's fundamentals actually looked worthy of the share price appreciation.

Just curious what your thoughts are on it if you have the time/inclination.

Thanks in advance and thanks for the post about NIH, I had wondered what the new execuive team's  impact might be.

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#3) On January 28, 2009 at 5:30 PM, TMFHelical (99.09) wrote:

Some notes.  The company list I posted is one compiled by GenomeWeb, which is widely read by researchers / those in acedemia (I'd like to take credit for it, but it isn't my list).  Good site and magazine, but research rather than pharma focused. 

I like that the current administration is increasing spending and think it is the right thing to do now - but very much fear that they will not stop the spending when the time clearly comes to do so.  Imagine the howls when they reduce the growth in NIH funding because 'stimulus' has served its purpose.  The 'it worked so lets continue it' is wrong minded thinking, but I expect it is what will happen.  

Enough political commentary.  Emergent Group (LZR) looks like an interesting micro-cap.  Never heard of them honestly.  But ... I'm reading quite a lot about hospitals and such delaying equipment purchases. This could be an opportunity for companies that rent / lease equipment.

I would look at customer concentration (often microcaps are over-reliant on singal customers). I would want to understand the product mix (more diverse the better - if just laser eye, I'm not interested).  Who are the primary customers, hospitals, individual physicians, or clinical trial CROs?.  What have recent presentations said about current opportunities (what isn't said is as important as what is)?

Past growth has been modest, but nothing exciting.  Clean balance sheet is a good sign.

I looked at the JP Morgan healthcare conference, but they did not present (or were not recorded).  There are other companies with similar names (emergent biosolutions, emergent solutions) which is a shame. Pays a dividend, which is a little odd in a microcap and may signal a lack of growth ambitions.  Try to determine 'why are they public'?  Do they really want to be?  Some insider ownership would be good, but I would see > 40% as not necessarily shareholder friendly - that they got their money from public markets but don't necessarily care to serve public shareholders would be the concern.

 

Why the recent stock pop?  Doesn't look too expensive.

TMFHelical

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#4) On January 28, 2009 at 6:17 PM, Tastylunch (29.45) wrote:

Thanks Helical

No one customer reps more than 10% of sales that much I know that much off hand, I'll look into the rest. Pretty sure hospitals are the primary clients. I do know they only sell in 4 states, Ca, Ariz, Colo and one other at the time being.

They were recently added to the AMEX and IBD lists them as their top stock under 10 dollars.That could be the source of the pop.

That and they are being hyped by a popular blog  and message boards which is the source of my intial skepticism as stated previously.

Thanks again for the opinion!

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