IPIC Message Board - Msg: 2307285

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Biotech / Medical : IPIC

IPIC 0.0001000

0.0%

Dec 18 4:00 PM EST

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To: Banjoman who wrote (752)	9/29/1997 4:47:00 PM
From: Pancho Villa	of 1359

Thanks for the lecture on biotech stock valuation for the benefit of all of us here at SI. I am quite aware of the fact that many people like to value companies in the red (not just biotechs) using sales multiples or just focusing for example on a strong sales trend as "profits will likely follow". Under some circumstances I think these may be usuful valuation tools/sanity checks. However, I just can't agree with a valuation scheme for IPIC based on year 2001 potential sales of Citicoline!!! I would at most agree on a one year projection of sales for an existing product line for a sales ratio calculation. I also have to disagree with your assessment of potential liability. Potential liability is indeed quite high. Expected liability, however, depends on the probability of success in litigation. It would be nice to know how you come to the implicit conclusion that the a-priori probability of success in litigation is quite low. If you are actually trying to take a shot at guessing now what actual liability will be let me remind you that this information will not be known for quite a while (i.e, until after the fact which is always too late for investement action - can't buy/short gold today at yesterday's prices) . By now we are all probably aware of the fact that valuing Biotech companies is more an art than a science (valuing any stock for the matter). It is precisely because most Biotech companies are "long shots" (i.e., very high uncertainty) a significant fraction of professional money managers - particularly value oriented ones - do not bother with this stocks. I agree with you that Chiron is a fine company and probably commands the multiple for a good reason. Keeping in mind that I am a short seller and plan on riding my position down to zero for reasons discussed in my previous messages; it would be nice to know, for the benefit of all of us at SI, what your relationship with IPIC, Besides "being a vague long" is Are you putting some of your hard earned money behind your words or are you just a grad student/professor having fun/earning a salary? PS: This will be my last input to this discussion as I move to more challenging research. To me, this is a solved case. Of course I may be proven wrong. After all for every seller of overpriced stock there is someone who is buying a bargain. We investors most definitely have access to a great deal of information. But only half of us respond to it the same way.

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