THE VIEW FROM HONG KONG
Friday September 29, 7:41 am Eastern Time
FUND VIEW-Profitable Biotech firms to triple by 2002
HONG KONG, Sept 29 (Reuters) - The number of profitable biotechnology companies should more than triple by 2002, the fund manager of the Franklin Templeton Biotech Discovery Fund said on Friday.
Kurt Von Emster told a briefing in Hong Kong that while there are only 15 profitable biotech companies right now, there will be more than 55 within the next three years, indicating the biotech industry's early stage of development.
``We're right at the base of this growth,'' he said.
Von Emster said many biotech companies are reporting growth curves similar to what the current top information technology companies showed before the tech boom on the stock market.
``These are the same sort of fundamentals that were ahead of us when we looked at Dell and Cisco, and all those companies ten years ago,'' he said.
The fund, which opened to U.S. investors in 1997, was up 84 percent on the year as of September 25. Franklin Templeton closed the fund to new investors at US$1.7 billion, opening up a cloned version for international investors in April. The offshore version takes in US$2 million to US$3 million from investors everyday, according to von Emster.
Biotechnology uses proteins and molecules -- rather than chemicals traditionally used in medicine -- to cure and diagnose diseases.
Hopes are pinned on the emerging industry because of the failure of conventional pharmaceudicals to effectively cure cancer and genetic diseases like Hemophilia and Cystic Fibrosis.
Many biotech products remain stuck in the pipeline, held up by extensive trial demands from regulatory agencies, such as the Food and Drug Administration in the United States. These roadblocks have kept revenues from exploding in a sector where product demand is otherwise very high.
But von Emster pointed out that biotech is still a risky sector for investors, saying that while some initial public offerings in the sector have seen 100 percent share price gains on their debut trading days, two companies in the fund's portfolio lost 85 percent of their market value in a single day.
Patent laws will also be a decisive factor for the life or death of biotech companies, because while patents can offer a company protection to their competitive advantage, patent litigation can also destroy a company's right to produce.
Major biotech firm Amgen Inc. (NasdaqNM:AMGN - news) is currently awaiting a judge's ruling in a patent infringement trial with Transkaryotic Therapies Inc (NasdaqNM:TKTX - news) over the enemia drug Epogen.
``If AmGen loses its patent, I will guarantee you AmGen goes down about 25, 35 percent in a single day.''
Amgen, along with Abgenix (NasdaqNM:ABGX - news), and Genentech (NYSE:DNA - news), are major holdings of the fund. |
