Market volatility didn’t spare Bay State
Biotech gains in year; energy takes hit
While the stock market sell-off appeared to hit every company equally, a deeper look shows how investors picked winners and losers in industries crucial to the Massachusetts economy, as several local biotechnology firms held up well during the volatile period, while energy companies remained out of favor.
A group of small to midsized biotech companies has been among Massachusetts stock leaders in recent months, taking only minor losses to share prices over the past several days. Cubist Pharmaceuticals Inc. of Lexington and Ariad Pharmaceuticals Inc. of Cambridge have notched sharp rises in their stock prices for the year.
At the same time, once hot clean energy firms such as battery maker A123 Systems Inc. of Waltham and EnerNOC Inc., a Boston energy management firm, have suffered heavy losses. EnerNOC’s stock price is down 55 percent so far this year and A123 is off more than 63 percent, with both experiencing the kind of large swings also hitting solar panel manufacturers and other renewable energy companies.
“If you look at the clean energy sector, a lot of these firms are government-subsidized and are not self-sustaining,’’ said Michael Lew, a senior analyst with Needham & Co., who covers A123’s stock. “A lot of the firm’s major customers are still in start-up stage. There needs to be a few more positive developments for people to buy into the market.’’
The two industries are at opposite extremes of a difficult year on the stock market for Massachusetts companies, with the Bloomberg index of publicly traded Bay State firms down 7.48 percent for 2011 so far. Their divergent fortunes hold significant implications for the state’s economy. Governor Deval Patrick’s administration has invested millions of taxpayer dollars to support companies in each sector, betting that they would prosper in the economic recovery.
The constant drumbeat of bad news has exposed the risks of investing public resources in industries whose ups and downs are defined by timing and global market forces largely out of the state’s control. The administration’s $1 billion, 10-year investment in the biotech sector is paying back with jobs and economic development, but support for the clean energy sector has yet to generate measurable returns and in some cases has led to embarrassment, such as the closing of Evergreen Solar Inc.’s plant in Devens that was built with a package of subsidies from the state worth $58 million.
Patrick Cloney, executive director of the Massachusetts Clean Energy Center, a quasi-public agency created to support the industry, said his organization is trying to build a clean energy cluster in the state through direct investments in companies and programs to help raise the industry’s profile and connect firms with early customers for their products. But he said it’s difficult for the companies to attract financial backers when the federal government is weighing cuts to tax credits and other support to the sector.
“Unlike health care, renewable energy markets can be created and destroyed with the stroke of a pen,’’ Cloney said. “What would be great is a long-term federal energy policy that would give direction to the marketplace.’’
A123 benefited from a $5 million state loan from the administration in 2010 and another $249 million in federal stimulus grants from the Obama administration. But its stock price closed at $3.49 yesterday from more than $26 in late 2009.
The company’s chief executive, David Vieau, said during a conference call last week that there are reasons for optimism. He said the firm’s revenue doubled from the first quarter to second quarter due to increased shipments of its products to electric car manufacturers.
“With a strong second quarter behind us and customer demand remaining robust, we believe the company remains on track to deliver greater than 100 percent year-over-year revenue growth in 2011,’’ Vieau said.
Meanwhile, several Massachusetts biotech firms, many of which are farther along in their development, are seeing their stocks soar as they notch crucial advancements.
Ariad’s shares have gained more than 75 percent since the start of the year. The company has developed a promising new treatment for sarcomas that its partner, drug maker Merck & Co., is expected to submit soon for Food and Drug Administration approval. A drug application was filed Aug. 1 for approval in the European Union.
But investors are also looking forward to next year, when Ariad is expected to submit for approval for a potential blockbuster treatment for chronic myeloid leukemia. “We’re seen as a multiproduct company in the oncology space, which is unique,’’ said Ariad vice president Maria E. Cantor. “Investors don’t like companies to have all their eggs in one basket.’’
Shares of Cubist have vaulted 50 percent. The firm this year settled a two-year patent dispute with Israel’s Teva Pharmaceutical Industries Ltd., rang up rising sales for its Cubicin antibiotic, and reported positive clinical trial data for two other antibiotics treating urinary tract and intra-abdominal infections.
“We see 2011 as a transformational year for Cubist,’’ said Tim Hunt, the company’s senior vice president.
Other big Massachusetts biotech gainers include DUSA Pharmaceuticals Inc. of Wilmington, which has seen a 72 percent return year to date, and Curis Inc. of Lexington, which has seen a 66 percent return.
Correction: Due to a reporting error, an earlier version of this story incorrectly reported the first name of the chief executive of A123 Systems Inc. His name is David Vieau.