This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

4 Biotech Stock Stars Losing Their Luster

Stocks in this article: CELGBIIBBMRNLIFE

Biomarin uses its deep expertise in enzyme-based treatments to target rare genetic diseases. The patient populations for these drugs may be small, but the selling price for each drug could be tremendous. The focus on niche diseases also means more limited competition.

Although Biomarin has several drugs on the market, it's the company's promising pipeline that explains why this stock has surged in value. A key drug, PEG-PAL, which treats sufferers of phenylketonuria, or PKU, may not reach the market until 2015. Before then, Biomarin's GALNS, which also treats PKU, may get FDA approval in late 2013. Analysts at Morningstar anticipate that this drug will get approval and predict peak sales of $800 million annually. Even if that happens, these analysts still think shares are worth just $44, or roughly 20% below current levels. That's the result of a 10-year DCF analysis.

In effect, this stock's tremendous run already reflects any good news yet to come.

Life Technologies

Life Technologies (LIFE), which provides a wide range of lab tools for biotech scientists has seen its shares surge more than 50% since the summer of 2012, when management noted that the company may put itself up for a sale.

Make no mistake, this is a "good" but not "great" business. Sales rose 5% in 2011 (to $3.8 billion) and 1% in 2012, and they are expected to rise just 3% in 2013 and 2014, according to consensus forecasts. Operating profits have never exceeded $650 million, meaning this stock trades for around 16 times likely peak cash flow. That's quite rich for a company with limited growth prospects.

The recent move -- from $40 to $58 -- has left shares vastly overvalued, and there appears to be little upside, even if the company is sold. If Life Technologies doesn't get acquired, shares may disgorge all of those gains.

To see these overvalued biotechs in action, visit the 4 Overvalued Biotech Stocks portfolio.

RELATED LINKS:



Follow Stockpickr on Twitter and become a fan on Facebook.

Stockpickr is a wholly owned subsidiary of TheStreet.com.
3 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,461.32 -153.49 -0.92%
S&P 500 1,927.11 -14.17 -0.73%
NASDAQ 4,382.8470 -36.6310 -0.83%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs