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Valuation Doesn't Equal Share Price (and That Goes Double for Biotech)

Most investors realize that share price is meaningless when comparing companies. A company at $50 per share might actually be worth more than a company at $100 per share because a company's value is determined by the number of outstanding shares in addition to the share price.

But in biotech, you can't even compare the current price of a company's shares to the price a year (or less) ago. MannKind (NASDAQ: MNKD  ) , for instance, ran up the day after its positive advisory committee meeting. While it didn't reach its 52-week high, investors are actually valuing the company more than it was at its previous high because MannKind has sold shares in the interim.

In the following video, Fool contributor Brian Orelli and health-care bureau chief Max Macaluso talk about why looking at a company's market cap is more important than its share price and discuss a few other examples -- Galena Biopharma (NASDAQ: GALE  ) , Sangamo BioSciences (NASDAQ: SGMO  ) , and ANI Pharmaceuticals (NASDAQ: ANIP  ) -- of companies with market caps that have grown much larger than their stock price because they've sold shares.

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Brian Orelli

Dr. Orelli is a Senior Biotech Specialist. He has written about biotech, pharmaceutical, and medical device companies for The Motley Fool since 2007.

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Related Tickers

9/1/2015 10:21 AM
ANIP $48.06 Down -0.72 -1.47%
ANI Pharmaceutical… CAPS Rating: ***
GALE $1.57 Down -0.01 -0.70%
Galena Biopharma,… CAPS Rating: *
MNKD $3.68 Down -0.11 -2.90%
MannKind Corp CAPS Rating: **
SGMO $7.53 Down -0.03 -0.40%
Sangamo Bioscience… CAPS Rating: ***