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Biotech / Medical : A Biotech Bonanza!
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To: Alys Hall who wrote (25)10/28/1997 11:19:00 AM
From: Giuseppe Scalamogna   of 64
 
Are the blue-chip drug stocks now attractive? I think they are more fairly valued now. One issue here is how some of these smaller biotechs are evolving into mid-cap and in some cases large-cap stocks. I don't think this bodes too well for already entrenched companies like Merck, Lilly, and Bristol-Meyers. I personally think they will face increased competition not only from amongst themselves here on out. The big company's advantage in here is more of a simple cash issue. They can go in and take over some of these proprietary companies for the underlying technology they present. In the case of Supergen, the Extra technology provides a whole new area of opportunity as it doesn't focus on a single drug. What happens though when some of these smaller biotechs vastly improve their operating cash reserves.

Small-caps in general have outperformed the market historically. Small-cap investing however is often misconstrued as some type of general phenomenon. It is more for knowledgable investors who can tilt the problems of assymetic information in their favors and score gains much higher than that of the generalized small-cap universe. Going forward, small-cap investing will rely on the ability of companies able to target niche markets which are sometimes untouched by other companies. Going up against larger companies and competing for their business is usually a death sentence. That is why I like biotech so much. Many niche markets are pristine and there for the grabbing. I am focusing most of my portfolio and overall attention to biotech/medtech companies. I think in the long-run this will pay off most.

GS
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