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Midwest life science stocks kept sizzling in Q2

Amazing what can happen in three short months! The major stock indices looked pretty lackluster at the end of the first quarter, but have picked up steam in the second quarter with the Dow Jones going from a one percent decline to a very robust eight percent growth for the first half. Not far behind was the NASADQ National Market, which showed no growth for the first quarter and 7% growth for the half year.

Unfortunately, the main biotech and drug indices, which were not particularly exciting at the end of the first quarter, did not gain much traction by mid-year, with only the AMEX Biotech Index showing some growth: three percent versus one percent in the first quarter.

If you will remember, the overall first quarter tepid market results did not seem to dampen the vigorous growth of the Midwest Life Science stocks, many of which had an outstanding first quarter.

Let's take a look:

Midwest Life Science Large Cap Stock Performance, First Half/2007
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Company/Ticker 1/1/07 Stock Price Q1/2007 Stock Price First Semester/ 2007 Stock Price % Change (first 6 months) Market Value (billions)
Dow Jones Industrials 12,459.54 12,354.35 13,408.62 +8% N/A
NASDAQ National 2,429.72 2,421.64 2,603.23 +7% N/A
NASDAQ Biotech Index 802.82 776.95 802.68 0% N/A
AMEX Biotech Index 754.25 764.18 777.49 +3% N/A
AMEX Drug Index 345.06 342.01 349.05 +1% N/A
1) Procter & Gamble (PG) $63.72 $63.16 $61.19 <4%> $192.7
2) Abbott Labs (ABT) $48.83 $55.80 $53.55 +10% $82.5
3) Eli Lilly (ABT) $52.45 $53.71 $55.88 +7% $63.4
4) Medtronic (MDT) $53.08 $49.06 $51.86 <2%> $59.1
5) 3M (MMM) $77.53 $76.43 $86.79 +12% $62.5
6) Walgreen (WAG) $45.89 $45.89 $43.54 <5%> $43.4
7) Dow Chemical (DOW) $40.00 $45.86 $44.22 +11% $42.2
8) Baxter International (BAX) $46.40 $52.67 $56.34 +21% $36.7
9) Monsanto (MON) $52.00 $54.96 $67.54 +30% $36.8
10) Cardinal Health (CAH) $64.18 $72.95 $70.64 +10% $27.2
11) Stryker (SYK) $55.55 $66.32 $63.09 +14% $25.8
12) Archer Daniels Midland (ADM) $32.28 $36.70 $33.09 +3% $21.6
13) Zimmer Holdings (ZMH) $78.78 $85.41 $84.89 +8% $20.1
14) St. Jude Medical (STJ) $37.97 $37.61 $41.49 +9% $14.0
15) Biomet (BMET) $41.45 $42.49 $45.72 +10% $11.2
16) Hospira (HSP) $33.75 $40.90 $39.04 +16% $6.1
17) Sigma-Aldrich (SIAL) $39.21 $41.52 $42.67 +9% $5.6
18) Abraxis Bioscience (ABBI) $27.60 $26.71 $22.23 <19%> $3.6
19) Dade-Behring (DADE) $39.76 $43.85 $53.12 +34% $4.4
20) Stericycle (SRCL) $75.50 $81.50 $44.46* +18% $3.9
21) Techne (TECH) $55.50 $57.10 $57.21 +3% $2.3
22) MGI Pharma (MOGN) $18.38 $22.47 $22.37 +22% $1.8
23) Steris (STE) $25.53 $26.56 $30.60 +20% $2.0
24) Perrigo (PRGO) $17.40 $17.66 $19.58 +13% $1.8
25) AllScripts Healthcare (MDRX) $27.03 $26.81 $25.48 <6%> $1.4


*Stock split on May 17, 2007

Source: Yahoo Financial Page: July 1, 2007

In spite of the overall major stock indices pickup in pace, the Midwest Life Science Large Cap stocks continue their torrid pace for the first 6 months of 2007, with very few companies losing ground. Twenty of the group's 25 stocks all showed growth for the first semester, with 18 stocks either matching the NASDAQ National Market's performance or improving on it.

Stock Price Leaders

Company % Growth

1. Dade-Behring +34%

2. Monsanto +30%

3. MGI Pharma +22%

4. Baxter International +21%

5. Steris +20%

6. Stericycle +18%

7. Hospira +16%

8. Stryker +14%

9. Perrigo +13%

10. 3M +12%

11. Dow Chemical +11%

12. Abbott Labs +10%

13. Cardinal Health +10%

14. Biomet +10%

15. St. Jude Medical +9%

16. Sigma Aldrich +9%

17. Zimmer +8%

18. Eli Lilly +7%


Stock Price Laggards

Company % Growth

1. Abraxis Bioscience <19%>

2. AllScripts Healthcare <6%>

3. Walgreen <5%>

4. Procter & Gamble <4%>

5. Medtronic <2%>

6. Archer Daniel Midland +3%

7. Techne +3%

Looking back at my comments for the first quarter regarding underpinning causes for such growth some of the additional events that took place during the first of 2007:

Hospira integrated its recent acquisition, Mayne Pharma, an Australian generic oncology business with operations in other Asian countries and Europe, strengthening Hospira's international business and adding new international management strength.

Baxter announced the spin-off of its Fenwal business.

Abbott announced in January the sale of the main part of its diagnostics business to GE Healthcare; it also recently announced a co-development and marketing collaboration with biotech leader Genentech for two of its cancer drugs.

Monsanto continues to make new biotech seed company acquisitions.

Cardinal Health announced the closing down of certain Chicago-based operations, which will be transferred to its Ohio HQ. It appears likely that Cardinal will sell its campus just north of Abbott Park.

MGI Pharma announced the expansion of its fast-growing emesis drug with new indications being sought from the FDA.

Biomet agreed to an $11.4 billion from a private equity group.

Deal surge

According to a June 15 article in Investors' Business Daily, there have been 450 healthcare deals thus far in 2007. In the first quarter alone, healthcare-related deals worth $73.2 billion were completed with this number up 69 percent over last year.

So why the surge in deals? According to the article, low borrowing costs are one reason fueling these acquisitions! Another is that some companies are just flush with cash and need new products to fill empty pipelines!

An impact still to be seen is the new congressional progress and pathway for approval of biological drugs as generics, the so-called “bio-generics” bill. How this new legislation will finally play-out in the second half of 2007 could put a real damper on stocks such as Amgen and other biotech companies with products reaching the end of patent expiration (or already expired).

See you soon!

Previous articles by Michael Rosen

Michael Rosen: The Right Brain: A neurological solution to the flattening world

Michael Rosen: The state of global biotech: An Ernst & Young perspective

Michael Rosen: Brazilian bio-industry should impress American investors

Michael Rosen: Olympics of biotechnology has international flavor

Michael Rosen: A Midwest passage to India, Part II

Michael S. Rosen is president of Rosen Bioscience Management, a company that provides CEO services, including financing and business and corporate development to start-up and early-stage life science companies such as Renovar and Immune Cell Therapy. Rosen also is a founder and board member of the Illinois Biotechnology Industry Organization. He can be reached at rosenmichaels@aol.com.

This article previously appeared in MidwestBusiness.com, and was reprinted with its permission. It is not meant to be a recommendation to buy or sell stocks!

The opinions expressed herein or statements made in the above column are solely those of the author, and do not necessarily reflect the views of Wisconsin Technology Network, LLC.

WTN accepts no legal liability or responsibility for any claims made or opinions expressed herein.

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