White-Hot at OSI [BW 1/15/01]
Biotechs such as OSI Pharmaceuticals (OSIP) have been a
booster shot for investors in an ailing market. Just a year
ago, the Nasdaq stock was trading at 7: a steal, it turns out,
since OSI is now around 70. The stock is down since its
Nov. 6 high of 86 3/8, yet early buyers of the $2 billion
company are keeping the faith. Dr. Liu-Er Chen, who picks
stocks for the $70 million Evergreen Health Care mutual
fund, earned his investors triple-digit returns last year
picking stocks such as OSI, and he says he's staying put.
He thinks OSI has the makings of a 150 stock by 2003,
when he expects the money-losing outfit to be profitable.
For now, the company is losing more money than at any
other time in its 15-year history: The net loss for the fiscal
year ended in September was $16.3 million, a 66% spike
over 1999. The loss is likely to go higher this year, as OSI
ushers products into later-stage clinical trials. Still, Chen
says the Uniondale (N.Y.) company has targeted 50 genes
with the potential to become small-molecule drugs to treat
asthma, high cholesterol, heart disease, and diabetes. Adds
Robertson Stephens analyst Michael King: ''If you can deal
with the volatility, you will be well rewarded. The company
has a strong pipeline.''
The clincher with OSI is its lead drug--the so-called
OSI-774--which aims to prevent the growth of tumors in
some 30% of cancer patients. OSI-774 is poised to tap
into a $1 billion market, ''one of the few opportunities to
invest in a cancer drug where the potential market is that
big,'' King says. Success rides on the Food & Drug
Administration's approval of OSI-774, ''the likelihood of
which is very high,'' says Chen. ''If everything goes well,
OSI could easily be worth $5 billion.''
Der Hovanesian covers the markets.
Gene Marcial is on vacation.
By MARA DER HOVANESIAN |
