Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: This article was prepared for ZetaKap Media by one of our full-time analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.
Not only is biotechnology considered to be a riskier category for investments, but companies in this sector tend to burn through cash during their research and development phases. It takes a considerable amount of money to launch an effective product. For successful investing in this category, it is key to align with biotech stocks that have not over utilized debt to fund growth. For our scan today we used two filters. For the first one, we focused on biotech companies that have kept their capital structure intact by not over borrowing. Then we looked for projected EPS growth rates above 25% for the coming year. Take a look at the biotech stocks we gathered to see if any spark your interest.
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. The 1-Year Expected EPS Growth Rate is an annual growth estimate, where the growth projections are made by analysts, the company or other credible sources.
The Long-Term Debt/Equity Ratio is a variation of the traditional debt-to-equity ratio; this value computes the proportion of a company's long-term debt compared to its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it to others to help analyze the company's risk exposure. Generally, companies that finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios.
The Debt/Equity Ratio illustrates how aggressively a company is financing its growth via debt. The more debt financing that is used in a capital structure, the more volatile earnings can become due to the additional interest expense. Should a company's potentially enhanced earnings fail to exceed the cost associated with debt financing over time, this can lead the company toward substantial trouble.
We first looked for biotechnology stocks. We then looked for companies with projected high growth, measured by 1-year projected EPS growth above 25%. We then looked for companies that have maintained a sound long-term capital structure (Long-Term D/E Ratio<0.1). We then looked for companies that operate with little to no debt (D/E Ratio<0.1). We did not screen out any market caps.
Do you think these stocks will offer healthy returns? Use our screened list as a starting point for your own analysis.
1) Durata Therapeutics, Inc. (DRTX)
| Sector | Healthcare |
| Industry | Biotechnology |
| Market Cap | $164.32M |
| Beta | - |
Key Metrics
| 1-Year Projected Earnings Per Share Growth Rate | 61.20% |
| Long Term Debt/Equity Ratio | 0.00 |
| Debt/Equity Ratio | 0.00 |
| Short Interest | 0.03% |
Durata Therapeutics, Inc., a pharmaceutical company, focuses on the development and commercialization of novel therapeutics for patients with infectious diseases and acute illnesses. Its principal product is the dalbavancin, an intravenous antibiotic product candidate, which is in Phase III clinical trials for the treatment of patients with acute bacterial skin and skin structure infections. The company is headquartered in Morristown, New Jersey.
2) Merrimack Pharmaceuticals, Inc. (MACK)
| Sector | Healthcare |
| Industry | Biotechnology |
| Market Cap | $880.03M |
| Beta | - |
Key Metrics
| 1-Year Projected Earnings Per Share Growth Rate | 49.20% |
| Long Term Debt/Equity Ratio | 0.00 |
| Debt/Equity Ratio | 0.00 |
| Short Interest | 2.40% |
Merrimack Pharmaceuticals, Inc., a biopharmaceutical company, focuses on discovering, developing, and preparing to commercialize medicines paired with companion diagnostics for the treatment of cancer in the United States. The company uses its proprietary Network Biology discovery platform to integrate the fields of engineering, biology, and computing to discover and develop therapeutics and diagnostics. The company, formerly known as Atlantic BioPharmaceuticals, Inc., was incorporated in 1993 and is headquartered in Cambridge, Massachusetts.
3) BioSpecifics Technologies Corp. (BSTC)
| Sector | Healthcare |
| Industry | Biotechnology |
| Market Cap | $125.97M |
| Beta | 0.40 |
Key Metrics
| 1-Year Projected Earnings Per Share Growth Rate | 61.50% |
| Long Term Debt/Equity Ratio | 0.00 |
| Debt/Equity Ratio | 0.00 |
| Short Interest | 3.22% |
BioSpecifics Technologies Corp., a biopharmaceutical company, engages in the development of an injectable collagenase for various indications. BioSpecifics Technologies Corp. was founded in 1957 and is headquartered in Lynbrook, New York.
4) Pain Therapeutics Inc. (PTIE)
| Sector | Healthcare |
| Industry | Biotechnology |
| Market Cap | $197.52M |
| Beta | 0.42 |
Key Metrics
| 1-Year Projected Earnings Per Share Growth Rate | 200.00% |
| Long Term Debt/Equity Ratio | 0.00 |
| Debt/Equity Ratio | 0.00 |
| Short Interest | 4.43% |
Pain Therapeutics, Inc., a biopharmaceutical company, engages in the development of novel drugs. The company was founded in 1998 and is based in Austin, Texas.
5) ACADIA Pharmaceuticals, Inc. (ACAD)
| Sector | Healthcare |
| Industry | Biotechnology |
| Market Cap | $146.36M |
| Beta | 2.66 |
Key Metrics
| 1-Year Projected Earnings Per Share Growth Rate | 50.00% |
| Long Term Debt/Equity Ratio | 0.00 |
| Debt/Equity Ratio | 0.00 |
| Short Interest | 7.79% |
ACADIA Pharmaceuticals Inc., a biopharmaceutical company, focuses on small molecule drugs that address unmet medical needs in neurological and related central nervous system disorders. The company was formerly known as Receptor Technologies, Inc. and changed its name to ACADIA Pharmaceuticals Inc. in August, 1997. It was incorporated in 1993 and is headquartered in San Diego, California.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/21/2012.
Source: http://seekingalpha.com/article/882161-5-low-debt-biotech-stocks-forecasted-for-growth?source=feed
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