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Biotech / Medical : Biotech Valuation
CRSP 55.08-2.9%Dec 26 9:30 AM EST
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To: Biomaven who started this subject8/2/2000 6:29:52 AM
From: scott_jiminez  Read Replies (2) of 52153
 
The current washout

My take is that some participants here need to be reminded that this thread has 'valuation' in its title. Valuation does not simply imply the pipeline and promise of individual companies, but the tone and mood of the entire market. The latter is sorely missing from the exchange here. 'Current washouts' have as much to do with fed worries, economic slowdowns, etc. as they do with any specific product. This discussion here, by failing to include the extreme bearishness in the NASDAQ of late, suggests the biotechs are impervious to these market forces.

I own the stock of a company which earns gobs of money and which is expected to significantly increase these *real* earnings for the foreseeable future. It is in a rapidly growing sector of technology. The stock is currently trading at a projected PE of 7.5 for estimated FY2001 earnings (14 analysts). Y'all are talking about washout for BT companies hardly earning a dime?!?! And other people are implying that the 'washout' in Cephalon is somehow anomalous, that their inappropriate attempt to apply Provigil to ADHD doesn't mean anything anyway and the stock will return to $60 in a jiffy.

And then many in our little BT community cast aspersions at the dot-comers for blind-sightedness.

If a rapidly growing tech stock - with real earnings and a very clean balance sheet - can trade at a middle single digit PE for next year's estimated earnings, I suggest that GZMO or CEPH (or the countless other biotechs discussed in this context) have only experienced a gentle morning mist as compared to what could - and may - happen. In other words, GZMO may have plummeted for reasons completely independent of the company...and therefore could go down A LOT further. Investing 101: ignore larger market forces at your extreme peril.

Within a disintegrating NASDAQ market, don't forget: other tech sectors have very impressive 'pipelines' as well.
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