I try to cater to the risk level of the institutional investor. For the risk-oriented investor, I recommend shares of AVI BioPharma, Genta or Geron.
I think that should be risk-craving investor. <g>
OTOH, his CGPI rec is fairly sensible (I own some myself).
Wall Street Transcript
Biotech Stocks heating up again
Wednesday August 27, 12:48 pm ET
67 WALL STREET, New York--August 27, 2003-- In an in-depth (2,200 words) Analyst Interview, Dr. Reni Benjamin, a Senior Biotechnology Analyst at Rodman and Renshaw, examines the outlook for the sector and shares specific stock recommendations. This interview excerpt is part of an in-depth interview from our 84-page Private Biotechnology Issue featuring in-depth interviews from an analyst and management from twenty one sector firms, and off the record quotes from top executives of the biotech companies discussing changes at the FDA, latest drug approvals, drug candidates in late approval stages, impact of genomics revolution, joint ventures with major pharma, future of genomics tools, new technologies, unmet medical needs in oncology, diabetes and neurology, changing biotech industry model, venture capital funding in biotechnology, government-funded programs, stocks to avoid, stock recommendations and more. This issue is available to subscribers by telephoning 212-952-7400 x1799 or through The Wall Street Transcript
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TWST: Reni, you're putting on a biotech conference. Could you tell us about that?
Dr. Benjamin: By way of background, Rodman & Renshaw is a full-service investment bank with a focus on small to mid-cap biotechnology and technology companies. We are committed to the long-term development of emerging companies through value-added equity research, institutional sales and trading, strategic advice, and capital raising. Our equity research, sales and trading efforts cater only to institutional clients looking to invest in undervalued, under-covered companies with outstanding technologies. Currently, the biotechnology team consists of seven PhDs of which four are senior analysts including myself, Elemer Piros, David Wood and Navdeep Jaikaria. Combined, we cover a wide range of therapeutic categories including oncology, cardiology, infectious disease, inflammation and autoimmune diseases. Companies currently under coverage by the biotech team at Rodman include Aksys (AKSY), Alteon (ALT), Ariad Pharmaceutical (ARIA), Applied Molecular Evolution (AMEV), AVI BioPharma (AVII), Cepheid (CPHD), CollaGenex Pharmaceuticals (CGPI), Cypress Bioscience (CYPB), Dyax (DYAX), Encysive Pharmaceuticals (ENCY), Genelabs Technologies (GNLB), Genta (GNTA), Geron (GERN), InKine Pharmaceuticals (INKP), Isis Pharmaceuticals (ISIS), Repligen (RGEN), Rita Medical Systems (RITA), SuperGen (SUPG), Tanox (TNOX) and United Therapeutics (UTHR).
As part of Rodman and Renshaw's continued growth and development, the company acquired all the rights to the Annual Techvest Healthcare Conference. The conference, to be held in Boston from October 21-23, 2003, will host over 150 public and private companies, as well as a large number of institutional and venture capital investors.
TWST: What are you going to do with it?
Dr. Benjamin: In addition to panel discussions with independent experts helping to sift through complex issues surrounding biotechnology and thought provoking and vibrant keynote speakers, we will showcase upcoming growth companies that we believe comprise the next generation of biotechnology companies. We already have over 150 public and private companies presenting to a large audience of institutional investors.
TWST: As you look at biotech today, where do you see the opportunities?
Dr. Benjamin: We believe biotechnology as a whole is going to outperform the general market in both the near and long terms - thus far, the sector has done just that. Within biotechnology itself, we believe the small and mid-cap names have the best chance of outperforming the overall market. While one could invest in the "blue-chip" biotechnology names such as Genentech or Amgen, we believe that much of the value is already factored into the company valuations. However, if one chooses to invest in small to mid-cap names, we believe that the potential return on investment could be multiple times the initial investment. Additionally, while the large cap biotech companies are at a later stage in their respective growth cycle, we believe many of the small to mid-cap names are just beginning the ascension of their respective aggressive growth cycle.
TWST: Biotech went from being very hot to being very cold and now it seems to be heating up again. Is that accurate?
Dr. Benjamin: I think that's extremely accurate. When the technology bubble burst and a lot of people became risk averse, one of the first sectors to be hit was biotechnology. The sector was performing extremely well during the genomics boom on the hope that the human genome sequence would yield a wide variety of therapeutics for various indications of large unmet needs. Unfortunately, in addition to investors becoming more risk averse, several other factors contributed to the decline in biotechnology valuations, including the failure of drugs to complete regulatory hurdles, the ImClone debacle, as well as general economic uncertainty and global insecurity.
That being said, there was a slow but steady turnaround at the end of 2002 and beginning of 2003. We believe this turnaround was sparked by the appointment of the new FDA commissioner and his pledge to facilitate the drug approval process and get therapeutics into the hands of physicians and their patients. Investors saw the new and improved FDA spring into action as therapeutics like Millennium's (MLNM) Velcade got approved in record time and with smaller clinical trials - within six months from the filing of the application and based on Phase II data, not Phase III. Additional products approved during the first half of 2003 include Aldurazyme from BioMarin (BMRN) and Genzyme (GENZ); Amevive from Biogen (BGEN); Fabrazyme from Genzyme; FluMist from MedImmune (MEDI); Iressa from AstraZeneca (AZN); and Xolair from Genetech (DNA), Novartis (NVS) and Tanox.
We believe the combination of increasing new drug applications (NDAs) and a faster, more expedient FDA created a buzz, as investors realized that products have the potential to be commercialized earlier than any other time in history. Additional industry buzz was created at the American Society of Clinical Oncology (ASCO) where waves of positive clinical data were released. There was an increased buildup of investor enthusiasm before ASCO, since all the abstracts were embargoed, as opposed to past years. Many people in the biotechnology industry - myself included - felt that the sector would sell-off after Asco as investors locked in profits. However, the fundamentals for the sector remain strong. The key regulatory and commercialization issues that plagued investors appear to be settling and the potential for companies to obtain funding for continued product pipeline development remains robust. Today's biotechnology investors are resilient; they have weathered the nuclear winter of the past couple of years and are ready to ride the wave of increasing strength in the biotechnology space.
TWST: What are you recommending today?
Dr. Benjamin: I try to cater to the risk level of the institutional investor. For the risk-oriented investor, I recommend shares of AVI BioPharma, Genta or Geron. All have upcoming events that could really drive company valuations. For example, Genta has Phase III trials coming up, which, if successful, could potentially break open a new market in chemotherapy sensitizing agents.
AVI BioPharma is an antisense play. They have data coming up in the second half that not only address large unmet needs in cardiovascular disease, but also in infectious diseases such as West Nile Virus and Severe Acute Respiratory Syndrome (SARS).
TWST: And they're all relatively near-term events.
Dr. Benjamin: Exactly. Within the next six months.
For the investor who is more conservative, we recommend CollaGenex Pharmaceuticals. They're an earnings story in that they actually make money. They market a drug called Periostat. They have a 115-person sales force to market the product, and they leverage this sales force to market other products that they co-promote or end-license from other companies.
TWST: What's the product for?
Dr. Benjamin: Periostat is prescribed for patients with adult periodontitis. It's used as an adjunct for scaling and root planing, the primary procedure used to treat individuals with periodontitis. In 2002, total product revenues reached over $40 million. The dental indication is the growth story that Wall Street and investors are aware of.
There's a hidden growth story that most investors don't know about, and that is that Periostat has successfully demonstrated positive clinical results in several Phase II studies for dermatology indications such as acne and rosacea. The company has demonstrated positive statistically significant clinical results, in double-blind and placebo-controlled trials, in reducing the symptoms associated with rosacea and acne. CollaGenex is evaluating Periostat in a Phase III trial for rosacea with results expected within five months. If it's anything like the Phase II trial results, Periostat will open a huge market for CollaGenex - a $1.2 billion market.
This interview excerpt is part of an in-depth interview from our 84-page Private Biotechnology Issue featuring in-depth interviews from an analyst and management from twenty one sector firms, and off the record quotes from top executives of the biotech companies discussing changes at the FDA, latest drug approvals, drug candidates in late approval stages, impact of genomics revolution, joint ventures with major pharma, future of genomics tools, new technologies, unmet medical needs in oncology, diabetes and neurology, changing biotech industry model, venture capital funding in biotechnology, government-funded programs, stocks to avoid, stock recommendations and more. This issue is available to subscribers by telephoning 212-952-7400 x1799 or through The Wall Street Transcript .
The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations. |
