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Biotech / Medical : Cell Genesys (CEGE)
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To: sam who wrote (790)3/18/2000 6:27:00 PM
From: david james  Read Replies (4) of 1298
 
"listed the 35 largest holdings of at least one major biotech fund -- CEGE being one"

My guess is that this explains a good part of the drop, and why the relationship to the price of ABGX is currently out of line.

Imagine that you are a major fund or institution that owns a bit of CEGE but are not a biotech fund. The price of CEGE is sitting in the 50s and you are told by your fund friends that people are pulling out of the biotech funds in droves, and some of the major ones own CEGE. What do you do?

The logical step is to sell some of your CEGE immediately - independent of whether CEGE is valued correctly. The big biotech fund has no choice but to pull out of CEGE when their investors take out their cash. The other non-biotech funds will just wait around until the biotech funds have finished their selling - or even help it down so these biotechs are forced to sell at rediculous valuations.

When the selling by the biotech fund dries up, the other insitutions can push it back to more reasonable valuations.

One of the problems with specialty funds like those dedicated to biotechs, is that investors in those funds might be quick to pull out when they see press get negative as it did last week. And the comments I saw last week pointed to quite large outflows from biotech funds.

Anyway, that's my guess. At least, it looks like CEGE started to get some strength on Friday.
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