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Biotech / Medical : Biotech Valuation
CRSP 51.11-2.1%Nov 13 3:59 PM EST
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To: enervestor who wrote (824)3/15/2000 4:33:00 PM
From: Biomaven  Read Replies (1) of 52153
 
OK, let's take this biotech v. internet analysis further.

1. Agreed that biotech-time is much slower than internet-time. Four years from now there are plenty of existing biotech stocks where the jury will still be out. I doubt if the same is true of the internets.

2. Internets do give you useful information each quarter. (Revenue and loss figures). Biotechs give you useful info less frequently. It's probably harder for an outsider to decide if a biotech product will make it than to decide if an internet product will make it.

3. Profitability: For biotechs, if their product works, they make lots of money, and that money flow is maintained for tens of years. For internet stocks, nobody really knows yet. I can predict with a fair degree of certainty that Sepracor, currently losing large amounts of money each quarter, will be making even larger amounts of money in 2003 and onward. I have yet to see a similar convincing analysis for a pure internet play.

4. Randomness: Biotechs have an unavoidable degree of randomness built into them. The most promising product can crash and burn with little or no warning. (Of course sometimes the warning signals are really there if you know what to look for). This risk can be handled to a considerable extent by diversification. Thats why I hold a lot of different biotechs.

Peter
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