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Biotech / Medical : VD's Model Portfolio & Discussion Thread

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To: Andreas Helke who wrote (4090)	2/13/1998 4:26:00 PM
From: Biomaven	of 9719

Andreas: <<I like Sepracor as a business but I am pretty wary about the stock price. For now I prefer to watch it from the sidelines and wait for either a serious price decline or a clear indication that it truly deserves its lofty stock price. Does anyone have an earnings estimate for 1999?>> I recommend you call the company and get a copy of the Morgan Stanley report from around 6 months ago. I think the key earnings years are actually 2000 onwards, as then all the new antihistamine revenue should be really kicking in. Sepracor is _very_ different from all the other biotechs I follow. With most biotechs there are very serious questions whether their products are going to be safe, effective, approved by the FDA and then find a substantial market, and whether the company can actually bring them to market without giving away the store to partners or killing shareholder value through dilution as trials and FDA approval drag on interminably. With Sepracor, these questions are much less of a problem. In some sense, it is much more like a generic drug manufacturer - the safety and efficacy of the underlying drugs have already been established. The only open question is whether their "improvements" are actually significant enough to enjoy non-generic pricing (and whether their patents hold up). In the case of Levalbuterol I think they have probably already shown enough to warrant a premium over the existing billion dollar generic market. In the case of the current $3 billion (and growing) non-sedating antihistamine market, they are getting a significant early boost from safety concerns about the existing drugs, as well as Schering-Plough's concerns about overcoming Claritin's patent expirations. Sure SEPR isn't as much "fun" as a brand-new technology company like Ligand or Isis. They're not at the forefront of the biotech revolution (although conceivably Versicor may be), but that's exactly why I feel comfortable with them constituting a major part of my biotech portfolio. Peter (who hereby promises to not talk more about SEPR on this thread for a while - I'm starting to feel like a certain LGND proponent <g>).

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