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Biotech / Medical : Biotech Valuation

CRSP 53.85

-4.5%

Jan 9 3:59 PM EST

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To: Biomaven who started this subject	2/26/2004 10:10:16 AM
From: JMarcus	Read Replies (4) of 52153

Notes from Ron Garren's presentation this morning:  Background: he is an MD oncologist; in the 1990s he did post-doc work at Stanford in molecular biology; and he is a co-founder of RIGL.  Big Pharmas are under tremendous pressure from generics. That situation will get worse for them in the future.  There is a threat to prohibit off-label uses of drugs. The motivation appears to be primarily one of cost-containment. Garren thinks it unlikely that such legislation will get passed.  Some reimbursement issues have hurt big pharma too. For example, doctors are making less money infusing drugs in their office. This year the reimbursement rates just went down from 95% of ave. wholesaled price to 80-85% of ave. wholesale price. Next year reimbursement will be based upon average selling price and no one knows how that is going to work.  As partners or buy-outs, biotechs are becoming more important to big pharmas.  Garren focuses on small cap biotechs. His ideal company for investment is one in the clinic with some indication of efficacy. Usually in Phase II. If you find efficacy in Phase I, that is a very good predictor of ultimate FDA approval.  He likes drugs that target unmet needs, even if the population is small. Small markets are not under as much pressure to contain drug costs. Biomarin has a good model. FDA is more likely to put the brakes on if the market potential is large and could bust the piggy bank.  ALTH has a good advocacy group. That can help force FDA’s hand.  Small drugs sometimes turn out to be big revenue generators.  Buy a basket of small caps. At least 8 stocks.  If there is a pivotal event for a small cap stock, and he can’t handicap the result, he sells a large portion of his position if the market rises in anticipation of the pivotal event.  Greatest fault for him is selling too soon because he sees something down the road that could be a problem but the larger market doesn’t see it. So you need to understand the market’s perception.  Likes some preclinical companies with great science. Risky. CRIS is an example. Need to take a long-term view for these stocks. The Hedgehog pathway looks very very important.  Likes LGND for its partnerships.  AXYX may have potential to decrease beta amyloid; even if it doesn’t, it may be “a better mousetrap” for treating AD.  ALTH uses radiation sensitizers. A subset of the trial showed that breast cancer patients did very well. FDA accepted NDA for June 4th PDUFA.  GENR is in the age-related macular degeneration space, which is very important. Its advantage is that it would not need to be injected into the eye but can be administered IV. Looking at the competitive landscape, he likes the stock at current prices.  CRXL just did a deal with Aventis for a flu vaccine. Their new cell line will be the platform cell line for vaccine production in the future.  There are some better values in the Canadian market. AOM is in trials for stem cell mobilization. This small market could expand. The low stock price makes it a good gamble.  Really likes NABI. Tremendous upside still there. Based in Florida, which is a negative. But they have a potential blockbuster vaccine for staph infections in their Phase III trial. Marc

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