Hologic, the "Woman's Health Company," announced today that they're betting the company on genomics.
Well, that's not exactly what HOLX announced, but practically speaking, when a $5B company with a mild amount of DX exposure decides to pay $3.75B to buy a nucleic acid testing firm (Gen-Probe), they're really betting the company on genomics.
I like the deal for both HOLX and GPRO - HOLX gets exposure to growing markets and technologies which nicely complement their core business. (Tthe combination of HOLX's focus on women's health and GPRO's HPV tests is a perfect fit.) GPRO - who's growth was slowing - gets a nice bump in valuation, and probably a good amount of independence.
It'll be interesting to see what becomes of the non-women's health applications of Gen-Probe. Will HOLX punt the cancer testing business to QGEN or Clarient (GE)? Since the deal is all-cash, HOLX might want to later de-lever by punting the cancer tests or other assets.
Two unfortunate side effects of the acquisition: Gen-Probe is/was the largest, most prominent molecular DX pure-play. With Gen-Probe losing its' independence, we're losing both a bellwether for MDX, and losing a buy-side specialist. Gen-Probe is/was in excellent position to commercialize interesting DX coming from smaller players, as is the case of their PCA3 product sourced from Diagnocure.
One other impression from the HOLX-GPRO deal: re-reading Roche's rationale for their pursuit of Illumina, it sure seems to me that Gen-Probe would have been a better fit for Roche instead of Illumina. I wonder if they'll try to top HOLX's offer. (Or maybe GE or Danaher will.)
Showing posts with label GPRO. Show all posts
Showing posts with label GPRO. Show all posts
Monday, April 30, 2012
Monday, March 14, 2011
Oncology-related stocks with profits and no R&D risk? Yes, please!
I can't give much of a recommendation on their choices, but SeekingAlpha puts forward a list of stocks related to oncology that are also profitable.
Take a read here.
Their choices are Quest (DGX), Genprobe (GPRO), and Genoptix (being acquired by Novartis.) I'd also nominate Genomic Health (GXDX), Myriad Genetics (MYGN), and Qiagen (QGEN).
Each of these companies are squarely in the diagnostics space, so they offer the stability of selling a product, rather than the ups and down of product development (as in drug discovery/development ventures), while, in many cases, having the same IP moat as the drug disc/dev companies, as the diagnostic technology or target IP is often patented, or the 510K FDA approval rserves as a barrier to entry for competitors.
It is generally perceived that diagnostics offer less upside than drug disc/dev companies, but if you consider how aggressively young biotech companies partner away risk (and upside), you wonder if the diagnostics companies offer the same upside, with much less risk.
Consider 3 companies:
Exelixis (EXEL), a biotech founded in 1994. Market cap: $1.2B
Myriad Genetics, a molecular diagnostics company founded in 1991. Market cap: $1.7B
Genomic Health, a molecular diagnostics company founded in 2000. Market cap: $725M.
There's a huge amount of selection & survivor bias in this analysis, but if you assume that each company was seeded with $20M in equity at founding, you would see the following CAGR in valuation:
Exelixis: 27%
Myriad: 25%
Genomic Health: 38%
This is not to say that these companies have generated internal rates of return (IRR) at these levels, as each company had a different financing strategy. Very light analysis indicates that Exelixis was much less capital efficient than either Myriad or Genomic Health
Exelixis:$1.11B in paid in capital
Myriad: $580M paid in capital
Genomic Health: $255M in paid in capital
Without knowing the exact dates and amounts raised by each of these companies, a precise rate of return can't be calculated, but simple observation (compare today's market caps to the amounts previously invested) suggests that not only were the diagnostics companies much lower in inherent risk, they are also higher in investment returns.
So, before buying into a drug discovery/development stock, consider following SeekingAlpha's advice, and look at profitable and growing oncology stocks like those listed above.
Take a read here.
Their choices are Quest (DGX), Genprobe (GPRO), and Genoptix (being acquired by Novartis.) I'd also nominate Genomic Health (GXDX), Myriad Genetics (MYGN), and Qiagen (QGEN).
Each of these companies are squarely in the diagnostics space, so they offer the stability of selling a product, rather than the ups and down of product development (as in drug discovery/development ventures), while, in many cases, having the same IP moat as the drug disc/dev companies, as the diagnostic technology or target IP is often patented, or the 510K FDA approval rserves as a barrier to entry for competitors.
It is generally perceived that diagnostics offer less upside than drug disc/dev companies, but if you consider how aggressively young biotech companies partner away risk (and upside), you wonder if the diagnostics companies offer the same upside, with much less risk.
Consider 3 companies:
Exelixis (EXEL), a biotech founded in 1994. Market cap: $1.2B
Myriad Genetics, a molecular diagnostics company founded in 1991. Market cap: $1.7B
Genomic Health, a molecular diagnostics company founded in 2000. Market cap: $725M.
There's a huge amount of selection & survivor bias in this analysis, but if you assume that each company was seeded with $20M in equity at founding, you would see the following CAGR in valuation:
Exelixis: 27%
Myriad: 25%
Genomic Health: 38%
This is not to say that these companies have generated internal rates of return (IRR) at these levels, as each company had a different financing strategy. Very light analysis indicates that Exelixis was much less capital efficient than either Myriad or Genomic Health
Exelixis:$1.11B in paid in capital
Myriad: $580M paid in capital
Genomic Health: $255M in paid in capital
Without knowing the exact dates and amounts raised by each of these companies, a precise rate of return can't be calculated, but simple observation (compare today's market caps to the amounts previously invested) suggests that not only were the diagnostics companies much lower in inherent risk, they are also higher in investment returns.
So, before buying into a drug discovery/development stock, consider following SeekingAlpha's advice, and look at profitable and growing oncology stocks like those listed above.
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