This month, in honor of the Fool's 10th anniversary, we're producing more "Top 10" lists than David Letterman. Last week, we gave you the 10 top major pharmaceutical companies. Today... drumroll please... The 10 Top Biotech Companies in the World.
First, motley investor, how many can you name, and in what order? Give it a whirl. Just try and name the top three. No, there aren't any cash prizes. (Geesh.) Time's up. Can you name number one?
We heard Amgen (NASDAQ:AMGN) from the crowd. Ding! Amgen is indeed number one. It was also a great investment when our real-money Rule Breaker Portfolio bought shares in 1998. Amgen claimed its fame, and its number one perch, with its groundbreaking cancer drugs, Epogen and Neupogen.
Number two? Anybody? That's right, Genentech (NYSE:DNA), the grandfather of biotechs is second in the world. That was a fairly easy call for Fools: Genentech was highlighted by the Motley Fool on Valentine's Day 2001 as a "Stock to Love." It sure has been.
But here's where it gets tricky. The third-largest biotech in the world doesn't roll off most tongues (although it's a nice sounding name). It's Serono (NYSE:SRA), of Switzerland. And you thought the Swiss only knew money, chocolate, cheese, watches, cattle, bridges, furniculars, railroads, cable cars, dynamiting and neutrality. They know biotech, too. Let's see who rounds out the top 10.
Top 10 Biotechs (on 2002 biopharma sales)
Company '02 drug sales
(in millions)
Amgen $4,991Genentech 2,164Serono 1,423Biogen (NASDAQ:BGEN) 1,034Genzyme (NASDAQ:GENZ) 858MedImmune (NASDAQ:MEDI) 786Chiron (NASDAQ:CHIR) 766Gilead (NASDAQ:GILD) 424Millennium (NASDAQ:MLNM) 159Intermune (NASDAQ:ITMN) 112Source: ContractPharma.com
As testament to the youth and risk in the industry, the last two are not yet profitable, and only four have topped $1 billion in annual drug sales. Granted, there are other large biotechs out there, they just aren't traded because they've been scooped up by big drug makers. Johnson & Johnson (NYSE:JNJ) has acquired several biotechs, and at least two of 'em at more than $2 billion a pop.
(You can learn more about these companies, and the big drug makers, in the July/August issue of ContractPharma.com, online or in print.)
Thinking about biotech
The Motley Fool has written an entire book on investing in biotechnology. Anyone seeking the reward of independent biotechs, while understanding the risks, should consider a number of factors:
- Is the company burning cash or profitable?
- If burning cash, what is the burn rate?
- How many years of cash does it have remaining?
- What drugs are in the pipeline (in development)?
- How large is the market for each pipeline drug?
- What is the competition?
- Who are the firm's strategic partners?
- What is it spending annually on research and development?
And that's just for starters. Investing in development-stage biotechs is not unlike rolling the dice and hoping for drug approvals, but if you weight the dice in your favor (buy companies with promising drugs in development, ample cash, and smart partners, etc.), then you have better odds of winning.
Eight profitable companies adorn our top 10. All 10 have products on the market. Clearly, from a business standpoint at least, these industry leaders are less risky than most. If you're looking at biotech, these should definitely be on your watchlist.
