IDPH--Positive preliminary results for pivotal trial of ID Message Board

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Biotech / Medical : IDPH--Positive preliminary results for pivotal trial of ID

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To: Roger Cranwill who wrote (550)	4/5/1997 10:11:00 AM
From: Brad C. Dunlap	of 1762

Hi Roger,well I don't know if I am best qualified to answer your question but I do have some input. Your thoughts are to be taken seriously because it is very difficult for the best of analysts to research and forcast accuratly into the future with so many unknowns that are present in Idec's situation. The first rule for the analyst is to error on the side of conservatism when forcasting future expectaions on a speculative stock. The .74/eps for the latter half of the year will be a nice number but this figure should have very minimum impact on any projected price made by any analyst when forcasting a future price for Idec. This eanings will be mostly non-recurring and therefore analysts will put minimal weighting on anything that is not expected to continue in the future. Figuring the cost of goods sold and marketing expenses should not be too difficult and the analyst will in most cases rely heavily on managements guidence. As far as what price Idec charges is a very important decision for mangement and for guidance they will look to the current therapies[chemo,radiation] and place a premium or discount depending on the advantages of C2B8. There was a Forbes article a few years ago that stated Idec would charge around $10,000/therapy. The analysts never used this figure in any of their models since they're to forcast conservativly. I believe Shekhar Basu while at Punk Ziegle was using around $6000 and Hecht was using around $5000/therapy. As far as mkt penetration forcasts, none of the analyst really know what to expect so once again you will see in their models very modest penetrations that increase over time[Montgomery used 10,20,30% in 98,99,2000]. The actual price targets are arrived form different valuation models[ dividend discount,cash flow discount,earnings discount,sales multiple and many others]. I believe that Montgomery Sec. arrived at a one yr target of 52 by taking the estimated eps in the yr 2000 of 3.20 and discounted back at 25% to arrive at 51. They also ran a multiple of expected sales and discounted this back as well and what other valuations other biotechs are currently trading. As you can see this certainly is not an exact science but it is the best that any analyst can do. The important thing for investors to do when reading a reserch report is to look at the inputs and assumptions that the analyst used and be sure where uncertainty exists that conservative assumptions are applied.

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