Certainly a retracement of some fast money. My only concern about the stock/stock price was the notion of how long it would take to commercialize INCY's IP position. I believed that people were being overly generous in capitalizing these future streams . .. today . . .. at very low discount rates. I exited early - but a few facts have changed since I left and I would apprciate anyone's comments on the following (or any other) matters:
1) INCY management gets my gold star award for capital raising. Remarkable is an understatement. Essentially we raised apx. $600,000,000 in cash in return for giving up a small percentage of the equity base. I would ear mark this as a case study in self preservation/independence/fisrt mover category.
Implications: 1) INCY management has money to burn on new projects (with this team that has been a winning proposition). Not only can INCY further its lead over present competitors, but it effectively keeps others out. I point to the following examples: R&D for 2000 is forecasted at $182,000,000 and they can keep growing that number going foward. If the big pharma's wanted to compete head to head it would require dilution to their future EPS streams. They are already about to wheather the great patent expirations of 2000-2004, so I bet all the low hanging fruit of cost savings are earmarked. Biotech cannot touch this R&D number. Look at the total R&D of BGEN, GENZ, IDPH, IMNX et all and then look at that $182,000,000 again. This field is increasingly belonging to CRA, INCY, HGSI, MLNM and others.
2) We have created 'option value' The field is young and moving, SNP's look like the next playground, but no one really knows. However, with the war chest and stock price INCY can get into any field that they are not already in. That is option value and they did not have this before. Remember PFE prepaying all their future royalties to INCY back in November. Well INCY needed the cash. Now they do not. PFE should be happy they paid when they did.
3) I may be dense but for the first time I have seen published reports of the value of INCY's future royalty streams. INCY's ex CFO had projected the NPV of those streams, but the company never wanted to talk about it. No hyping and please no lawsuits. Well Alex Brown (2/23/00) says the NPV of future royalty streams is worth $165 per share today. I am amazed! That is much higher than I have factored in.
So let the geers begin and damn be he/she that first crys "Hold Enough"
Cheers, |
