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The Rise and Fall of Undervaluation

December 9, 2009
If "price to cash" is a usable metric for fair value of a risky biotech (i.e. valuation of a biotech vs what its cash balance is at the bank), then the cheap times are long gone. Back at the end of 2008 we had a record 24% of biotechs trading below cash. Investors were making the assumption that the previous reported cash balance was already being spent and additions to the balance were in jeopardy. Now we have just 5% trading under cash. Note that most of these are stocks are trading under $1.00 (bars in red):