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Biotech / Medical : QLT PhotoTherapeutics (QLTI)

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To: Joe Stephenson who wrote (43)	8/24/1996 11:55:00 PM
From: John Metcalf	of 1321

The takeovers have generally been at above current market value. For example, Elan's recent takeout of Athena provided a premium to shareholders. In addition, when deals are for stock, you can hold the stock of the acquirer to defer taxes on capital gains. The situation to avoid is buying an undercapitalized biotech. Years away from earnings, and with expensive research to complete, some companies sell the jewels before they ever get to market. An example would be Cytogen, which has sold most of the rights to their newly approved ProstaScint, and has now added a new partner, CR Bard. None of the PDT leaders are particularly flush with cash. QLTIF has 18% of its market cap in cash, PDTI has 15%, PCYC 13%. PCYC just called off a follow-on offering this week due to poor market conditions. All of these companies will have to raise cash through product sales, dilution to shareholders, or partnership arrangements.

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