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Biotech / Medical : Biotech Valuation

CRSP 51.11

-2.1%

Nov 13 3:59 PM EST

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To: aknahow who wrote (6515)	6/7/2002 3:03:27 PM
From: rkrw	Read Replies (2) of 52153

I don't follow your logic a bit. Strong cash is a near necessity for success in biotech: 1. R&D can cost anywhere from $50M or so to $100's of millions to develop a single biotech product. 2. Strong financial position provides leverage in dealing with partners. No money, you can only dream of a fair deal. 3. Low cash, you may as well bank on the co. in question cutting serious corners and going with the most advanced program and pruning potentially promising early work. 4. Low cash, low share price is a time tested formula for generating severe shareholder dilution. How do you think xoma ended up with >70M shares outstanding? How did all the toxic convertible offerings come into play? 5. 95% of biotechs aren't stupid when it comes to cash. They've been through the vicious cycles before. Almost all took full advantage of the windfall in 2000/2001. Had biotech followed your illogic, the sector would truly be in pitiful shape right now. At least for the most part the sector is flush with cash and in the toilet rather than broke and in the toilet :-) Another question, which bio's have a strong pipeline and weak cash? I'm hard pressed to find one example.

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