Biotech Valuation Message Board

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Biotech / Medical : Biotech Valuation

CRSP 52.51

+2.7%

Nov 14 9:30 AM EST

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To: Biomaven who wrote (2251)	12/8/2000 10:05:30 AM
From: Biomaven	Read Replies (2) of 52153

Some fairly naive attempts to justify biotech valuation by comparison with PFE: thestreet.com thestreet.com The comparison is naive mainly because pharma has more highly profitable mega-blockbusters, whereas biotech has many more niche drugs. Thus a comparison based just on numbers of drugs is clearly simplistic. OTOH, I believe the overall conclusion is correct. If we look ten years down the road, I believe that biotech drugs will exceed the value of PFE's drugs by a very wide margin. It is also nice to see a refutation of the "biotechs are vulnerable because they haven't been taken out and shot yet like all the other tech stocks" argument. The only validity this argument has is that if funds that are heavy in tech need to sell stocks to meet withdrawals they might latch onto their biotech winners to find cash. It is always worth remembering that stock prices are driven by two very different phenomena - the "value" of the underlying stocks and the supply/demand for the stocks. When PC-related companies tank, this essentially has zero effect on the underlying value of biotech stocks. However, if the same people and funds who own the PC stocks also own some biotech stocks, then the biotechs will tend to fall in sympathy. Peter

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