By Jennifer Friedlin
To get everyone’s mind off the truly depressing downturn in the capital markets, I set out to write an uplifting column highlighting the fact that most of the companies in the Genome Technology Index have wads of cash to keep going until the market turns up again.
But after scanning the balance sheets and tallying up the total cash available to these companies — upward of $5 billion — the dark side of the good news quickly emerged. With many shares trading at historic lows, the difference between the amount of money some GTI companies have and their market capitalizations has narrowed dramatically.
In late March, Compugen’s market valuation was hovering just above its cash position, while Aclara and Genomica were trading under cash, meaning that investors have basically decided that these companies are worth zilch. All of this is particularly disconcerting considering that only a year ago these companies all raised tens of millions of dollars in IPOs.
The fact that a number of these companies are trading under cash has some people talking about the possibility of takeovers. Given the low valuations being assigned to many, now might be the time for a big pharmaceutical company or a large technology player to swoop in and acquire the smaller genomics business that have interesting technologies and strong balance sheets.
Aclara, fearful of a potential takeover bid, issued in March a special rights program for existing shareholders designed to at least force potential buyers to talk with the company’s board of directors before attempting a buyout. So far, no other firm has signaled similar plans to put in place such protective measures — but who knows what will happen if things don’t turn around soon.
The real good news might have to wait a while longer.