Midwest large cap life sciences mostly outperform market

Midwest large cap life sciences mostly outperform market

CHICAGO – It’s that time again for the half-year roundup of stock market results for major indices and the U.S. life sciences sector. If you recall the results from the first quarter, it was pretty dismal for the major indices:
• Dow Jones down 3 percent
• Nasdaq National Market down 8 percent
• Nasdaq Biotech down 16% percent
• Amex Biotech down 9 percent
This isn’t a great trend. As you can see below, the results for the first six months of 2005 weren’t much better. The only major change is the Amex Biotech index, which actually grew. Why? Well, remember that this index is a relatively narrow one that features the largest cap biotech stocks (which, for the most part, are the healthiest ones).

Amgen, Genentech, Genzyme and other large cap biotech stocks are for the most part having robust years based on the continued strength of their product pipelines and portfolios. How does this translate to Big Pharma companies and our large cap Midwest life science companies? Let’s take a look and find out:

Overall performance for our Midwest large cap life science group is mixed with a little more than 50 percent of the companies showing stock performance increases better than the major indices and the remaining group showing declines or equivalent performance.
There are a number of issues in general impacting U.S. stock prices including the significant rise in oil prices and the continued increases in interest rates. There are also company-specific issues that impact stock prices.
One would think that the life science sector would be impervious to much of this as the aging U.S. population continues to spend on health-care at a torrid pace. However, many of the companies on this list are multi-nationals with significant operations overseas. They have to weather not only U.S. economic impacts but those of multiple other countries in which they operate.
Additionally, some of the companies on our list are not pure-play life science companies.
They may have significant other non-life science businesses that may be lagging and may be at the core of the problem. For instance, life sciences are still a small part of Procter & Gamble’s revenues and income even with overall sales of more than $2 billion in this business segment. The same could be said of 3M and Dow Chemical.

The growth of Allscripts as our leading performer in the first half of the year is a testimony to the need to eliminate paper in medical practices and have easy and quick access to patient information. This digitalization and software interconnectivity is a huge growing need in the U.S. as health-care becomes increasingly complex for each person.

Next week, we’ll look at the results from our Midwest biotech sector to see what the landscape shows for these smaller cap companies. See you next week!

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