Friday, June 20, 2008
Biotech is no longer just a drugs game.
I'm at the annual Biotechnology Industry Organization (aka "BIO") Conference here in San Diego. The buzzwords I keep hearing are biofuels, green energy, and agribusiness. This year's tag line is Innovate. Heal, Fuel, Feed the World. And no shortage of businesses are claiming to do just that...
On Tuesday, keynote speaker Arnold Schwarzenegger highlighted several state energy programs that use biotechnology. And before the "governator" took the stage, genomics pioneer Dr. Craig Venter discussed his biofuels research...
As CEO of Celera Genomics, Venter headed efforts to sequence the human genome. Today, he's launched his own private research institute focused on creating synthetic life forms... Essentially, he's making creatures that eat carbon and excrete fuel.
Innovators like Venter are about to make a boatload of money in ag-bio, biofuels, and other "green" life-science technologies.
You see, when oil was $30 a barrel and corn still cost $2, biotechs didn't have a reason to develop alternative energies or agricultural breakthroughs. Now, oil is over $130 and corn is $7.50 – and hitting new highs along with wheat, soybeans, and rice. The biotech industry wants a piece of the action...
Large players like Monsanto (MON) and Syngenta (SYT) dominate the food side of the game. Both companies develop insect-resistant crops and genetically engineered seeds. Over the last year, Monsanto's shares have doubled, up nearly 110%. Syngenta is up nearly 75%. Both are still in relentless uptrends.
But today, the stocks are too rich for my taste: Monsanto sells for 45 times earnings and Syngenta for 30.
One company I like better is Denmark-based Novozymes. Novozymes works on food, energy, and... oh yeah... drugs. The company makes specialty enzymes. Its products are used in dishwashing detergents, food and alcohol production, oil and ethanol processing, livestock feed, and pharmaceuticals. Novozymes netted $1.5 billion in sales last year. And the $5 billion company is trading at reasonable levels today.
The one catch is that the stock trades on the OMX Nordic Exchange in Copenhagen. That makes it more difficult for U.S. investors to buy.
The same is true of a couple of other interesting companies I found at BIO...
Take Danish company Danisco, for example. Danisco is one of Europe's largest producers of sugar. Its technology also transforms raw materials into livestock feed, biofuel, and plastics. Last year, it brought in $4 billion in sales from customers in close to 50 different countries.
And Euronext-traded DSM sells plastics, polymers, and chemicals used in human health and animal feed. And half of its $13 billion in sales last year came from industrial materials. The $10 billion company also has a manufacturing relationship with one of my favorite Phase 1 picks, Dutch biotech Crucell (CRXL).
I'm not suggesting you buy any of these stocks, not without putting in some solid research. But these companies are all cashing in on a trend I expect to track for some time. The agriculture and energy sectors are minting money right now... As the biotech industry is figuring out, there's plenty to go around.
Steelmakers confirm the infrastructure story... Tenaris, Gerdau, Schnitzer, and Olympic hit new highs.
Trash hauler Clean Harbors at an all-time high... up 60% in one year.
Hotel stocks go the way of the cruise lines... Marriott and Morgans make new lows.