Midwest small-cap life science stocks plummet in 2005

16 Jan Midwest small-cap life science stocks plummet in 2005

Although I was not at JP Morgan Healthcare Conference in San Francisco last week, I talked to several people that were and understand that it was mobbed. It used to be that people went to the conference to listen to what the presenting companies had to say, and then made their prognosis for the year. Now, as it is so attendance-jammed and hard to often get entrance to the official event, a lot of people go just to have meetings with others that are going to be there; it has become a deal-making forum on many levels.
Throughout the week, the “War of the Stents” continued, with both Boston Scientific and Johnson & Johnson both raising the ante. The stickler is that the Johnson & Johnson bid already has FTC clearance whereas the Boston Scientific bid does not, even though it is the higher bid. As of time of writing this article, it is still not clear who is the winner, although the Guidant board seems to favoring the J&J bid.
Last week’s article focused on the performance of the Midwest Large Cap Life Science group of companies and the overall stock market for the 2005. Results for 2005 showed a flat year for the major indices, with the only outlyer being the highflying Amex Biotech Stock Index, which highlights the better and biggest biotech companies. Results for the Large Cap Midwest Life Science companies was a mixed bag with 14 companies up in stock prices and 12 companies down or flat. Just to refresh your memory, let’s look a the major indices again.
Stock Market Indices – 12 Months/2005

The Small Cap Midwest Life Science group literally fell off a cliff. Let’s take a look:

Midwest Small Cap Life Science Stocks – Nine Months/2005

*Company had its IPO on June 17th, 2005.
**Company had its IPO on Aug. 5th, 2005.
***Company had its IPO on Aug. 8th, 2005.
Well, the good news is that three Midwest companies had successful IPO’s during 2005: Atricure, Advanced Life Sciences, and eV3; however, only eV3’ stock price (+5%) was up since its IPO – the other two were down!
Another negative impact on Midwest companies was the acquisition of Bio-Logic Systems by Natus Medical (NASDAQ: BABY) for $66 million in October, 2005. As Bio-Logic has $15.3 million on its balance sheet at the end of August, the net acquisition cost was about $50 million for Natus. Natus is located in California and has a market cap of about $325 million, and markets products for the detection and monitoring of new-born babies, including hearing disorders which was the segment Bio-Logic was involved in. Hopefully, those executives of Bio-Logic Systems who have made money off this deal will re-invest in new Midwest life science companies.
This acquisition makes the 5th Midwest company to be acquired in the last 5-6 years: CIMA Labs (Cephalon), Esperion (Pfizer), Orphan Medical, Unimed (Solvay) and now Bio-Logic Systems.
Stock Performance Leaders (Outperformed NASDAQ Biotech Index):

At least there is a group of companies with very solid stock performance. Aastrom Biosciences seems to have been revived from the dead and had outstanding performance as did Techne, Lifecore Biomedical, Allscripts, and Akorn which underwent significant restructuring.
Stock Performance Laggards (Underperformed NASDAQ Biotech Index):

Let’s hope that 2006 brings calmer waters for Midwest Life Science companies. Hopefully the BIO 2006 Annual meeting in Chicago will bring renewed interest in Midwest companies in terms of investments, and business development deals.
See you next week!