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Biotech / Medical : Biotech Valuation
CRSP 52.51+2.7%3:59 PM EST
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To: Biomaven who wrote (1119)5/18/2000 11:42:00 PM
From: Lighthouse  Read Replies (1) of 52153
 
Thanks for the response.

I believe Wall Street was looking for those contractual values to be the cash I.V. to fund further R&D fields for INCY. Current database operations are doing fine, but the genomics information field is moving very rapidly. If INCY has to change quickly in mid course then that will cost bucks. Also I believe there is a very real sense that the cost of the detection/analysis tools and talent will go up. Until very recently INCY did not have the wherewithal to pull that off.

The contractual value cash streams gives INCY "real option" opportunities. No one knows what will be next, but if you have a big honey pot then you can play in whatever looks good. My explanation is not great but how about this analogy. Microsoft uses its windows profits to invade and conquer the browser market. Without that certain cash flow Microsoft has a much harder time wiping out Netscape; however, the market knows MSFT has this capability and is therefore more willing to asign a higher value to its existing stream of earnings.

If INCY has a large cash stream coming in then it can afford to chase many promising leads or make sure it wins the fields that will be important. From this prespective I have taken the position (perhaps until now) that INCY is worth more with the ccontractual rights than without them.

Way off base?

Cheers,
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