Nearly 75% Of Biotechs Have No Earnings

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by Tyler Durden
Sunday, Mar 22, 2015 - 9:31

With the red-hot, and making new record highs every day, biotech index - which together with AAPL is the main driver behind the Nasdaq's surge back over 5,000 - seemingly all anyone can talk about, we decided to layout the simple facts.

  • Below is a chart of the 150 companies that make up the Nasdaq Biotech Index (NBI), broken down by Net Income.
    • Of the 150 companies, in the last 12 months only 41 had earnings, i.e., Net Income, amounting to just under $31 billion
    • Of this $31 billion in earnings, just 5 companies - Gilead, Amgen, Shire, Biogen and Celgene - had net income over $1 billion
    • Just these 5 biotechs represented 83% of all the earnings generated in the NBI
  • 109 companies in the NBI lost money in the last 12 months.
  • In summary: only 41 companies in the index were profitable, which means 72.5% of biotechs lost money
  • 83% of Biotech earnings were generated by just 12% of the companies

Visually this is shown as follows:


If one excludes the companies with a market cap under $1 billion, the layout remains largely the same: of the 87 biotech companies that fall in this category, 68% lost money. Once again the "big five" accounted for 84% of the entire industry's Net Income.


So what does the market think? Well, adding across the entire NBI, the market cap is about $1.06 trillion. As for the Net Income, it was $21.1 billion in the LTM period.

In other words, the Nasdaq Biotech Index now trades with a P/E of 50x, with over 80% of the entire sectort's earnings concentrated in just 5 companies.