A few weeks ago Jim McCamant commented on what a bargain Biotechs were:
SAN DIEGO, Calif.--(BW HealthWire)--Aug. 11, 1997--Investors with a long-term
view should take advantage of the "unusual opportunity" to accumulate currently
depressed biotechnology stocks, a leading industry figure told investors Aug. 9 at the
1st Annual San Diego Biotechnology Forum.
"I think biotech is the most interesting technology around," Jim McCamant, editor of
the Medical Technology Stocks Letter, told attendees. "It's where electronics was 30
years ago and like electronics has, biotechnology is going to have a much larger impact
on your lives than you can imagine over the next 20 years. In the process, it's going to
make investors who realize that a lot of money.
"In fact, most people don't know it," McCamant added, "but Bill Gates is a very active
investor in biotech. He owns 15 percent of ICOS Corp. (NASDAQ:ICOS) stock.
Gates agrees with me that the next great technology revolution is in biotech."
McCamant's remarks capped the morning-long Forum geared for individual investors.
It was produced by Sacramento-based Informed Investors, Inc. and co-sponsored by
Investor's Business Daily.
Preceding McCamant, attendees heard analyst-style presentations, plus Q&A, from
Daniel Kisner, M.D., president of Isis Pharmaceuticals (NASDAQ:ISIP); Steve Engle,
chairman/CEO of La Jolla Pharmaceutical Co. (NASDAQ:LJPC); Arthur Benvenuto,
chairman/CEO, and Dr. Gary Gentskow, executive director of Worldwide Medical
Affairs, Advanced Tissue Sciences (NASDAQ:ATIS); and Larry Stambaugh,
chairman/CEO, of Maxim Pharmaceuticals (AMEX:MMP). Audio tapes of the
presentations, including McCamant's, are available for $25. Call 800/992-4683.
McCamant said the biotech industry started with gene splicing breakthroughs in the
'70s. "The industry as an investment started in 1980 when Genentech became public,
so it's a young industry."
Biotech stock prices have endured major cycles with the most recent peak in early
1992, McCamant said. Since then, biotech stock prices have failed to take into
account extraordinary scientific breakthroughs at many companies.
Among the numerous scientific breakthroughs discussed came from Advanced Tissue
Sciences' CEO Benvenuto. "Our starting material for (growing) skin is newborns...
circumcision from newborns, and from one, we can actually grow the equivalent of six
football fields worth of material." He added that skin and cartilage can be grown in
two-to-three weeks.
"Investors may get excited with the latest scientific breakthrough, but it takes a long
time before they become commercial reality... typically at least 10 years," McCamant
said. "We're now at a stage when things are beginning to move ahead more rapidly on
a commercial side and we are also in a period where investors are less aware rather
than more aware."
"The inherent inefficiencies in biotech are also part of the opportunity," McCamant
said. "Students of investing understand that you should be looking for inefficient
markets, when stocks are priced different than what their value is. There are probably
a few biotechs priced more than what their value is, but there are many, many more
that are priced less than what their value is.
"Isis, for example, is still below the high made during that time period (1992) despite
the fact that it has made huge technical progress," McCamant said. "People then were
buying it for its potential. Isis now has a whole series of products, some of which are
nearing approval so the real value is four times, five times, maybe as much as 10 times
(what it was in 1992) because the risk is substantially reduced because they've showed
this technology actually works.
"In late 1991 according to one analyst, there were 23 products out of the biotech
industry that were in pivotal trials, where if trials were successful, it could lead to a
marketing application" McCamant continued. "Now there are between 200 and 250,
almost ten times as many products in late-stage pivotal trials. Sounds to me like we are
going to have more products approved... and we are going to have more approved
each year.
"We have a situation now where biotech stocks are so undervalued that the next move
is going to be at least as good as the one in 1991 and 1992... and that was a year in
which the biotech stocks were the best performing group," McCamant said.
"We'll see the phenomenon we've seen in the last 18 months with Agouron
(NASDAQ:AGPH) where the stock has moved very substantially as they start to
produce sales...first the anticipation of that, and second, the actual sales which have
exceeded analysts estimates."
McCamant outlined the importance of corporate partnerships, the FDA, research &
development, quality of management and capital strength in evaluating biotech stocks.
"Management is key, science is key," McCamant said. "Chiron has the best science
among the larger companies. In earlier years Genentech (NYSE:GNE) clearly had the
best science. Amgen (NASDAQ:AMGN) made its success by focusing its science on
a relatively narrow number of products and doing a superb job of bringing those
products to commercial development.
"I believe Chiron will end up leading the next big move in the biotech stocks,"
McCamant concluded. "It's the only one that can easily double without worrying about
evaluation. The company spends a lot money in R&D and there is a lot of
under-the-surface value that will begin to surface in the next 12 months."
McCamant offered rules of thumb to follow when investing in biotechs. One ingredient
is patience because even the best companies falter.
"The classic example is Amgen which came public at $18. Roughly two years later it
broke $4," McCamant said. "You don't have to buy stocks at the bottom to get rich in
this sector. That's why I like to talking to individual investors about biotech because
you can afford to take a long-term approach with your own money. It is still a tough
time for biotech but it is a time for opportunity for those of us who believe we know
what we're doing and have faith in the industry."
The San Diego event was the second biotech Forum sponsored by Informed Investors
Forum in recent weeks. On July 27, Informed Investors hosted a Mid-Year Biotech
Forum in Emeryville, Calif. David Crossen, Senior Biotech Analyst with Montgomery
Securities, was the featured speaker.
Companies presenting on July 27 were Arris Pharmaceuticals (NASDAQ:ARRS),
Chiron Corp. (NASDAQ:CHIR), Connetics Corp. (NASDAQ:CNCT) and Matrix
Pharmaceutical (NASDAQ:MATX).
Since 1993, Informed Investors Forums have been linking investors with management
of public companies. Tapes of each Forum are available for $25. Tape sets for both
Biotech Forums is $45. Call 800/992-4683.
CONTACT:
Informed Investors
Tim Quast, Bob Taylor or Steve Chanecka
916/448-8222 or 888/992-4683
KEYWORD: CALIFORNIA
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