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Biotech / Medical : VD's Model Portfolio & Discussion Thread

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To: quidditch who wrote (9084)	12/31/2001 12:57:46 AM
From: Vector1	Read Replies (1) of 9719

As Peter Suzman wrote on the biotech valuation thread, the information gleaned on the conference call tomorrow will be critical. IMCL had a very substantial valuation based largely on one product and a big deal with BMY, the big pharma with perhaps the premier cancer franchise. Unfortunately for IMCL, the deal with BMY allowed for sharholders (yes including management to sell shares) to sell shares but did not generate cash for the company. The cash payments are $300m when the BLA is accepted and $500m on approval. The company has over 80m shares fully diluted and really one product. I have to admit, I have never liked this management team and have not given the company serious consideration for a long time. Over the last few days I have looked at it again and am astonished at the market cap. Basically until a few days ago IMCL had a higher market cap than SEPR and almost 3x OSIP. Even if the FDA did not crap all over the BLA this stock was going down. The fundamentals just were not there. a $5b valuation and IMCL was only keeping 37% of the gross on Erbitux which is a $500m drug if they are lucky and good by 05. This stock was horribly overvalued. Just incredible still in 2001 when the lessons of overvaluation should be fresh in the investors mind. I wonder if the way to play this stock is to buy the convert, which is convertable in the mid 50s. After this stock crashes over the next week or so the convert will go into the busted convert graveyard and trade based on yield. At 60 or lower it will be a great buy even if the stock is in the low 20s. If the company has a long delay you collect the coupon and when the BLA is inevitably accepted a nice return with great downside protection. Since we do not buy converts in the VD portfolio I would not buy the stock unless it hit the mid to low 20s. If it never get there so be it. The rat race to file the shareholder lawsuits is on. On a relative basis, I believe today CRXA is a more valuable company than IMCL straight up. MOGN has a valuation that is a fraction of IMCL and drug that is probably less efficatious and certainly more toxic. MOGN has a better management team. V1

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