Sugen closed at 12 5/8 yesterday. Everything is on track at the company and there have been no negative developments to explain the low price. It seems that the market has simply not yet discovered this stock. Here is an overview of Sugen. Am I missing something? I would love to hear if anyone knows why the stock price is not much higher than it is.
Investment Thesis: Milestones in the development of Sugen's drugs, particularly for SU101 which is now entering Phase III of human trials, should push Sugen's stock price up significantly in 1998. Lehman Brothers rates Sugen as a buy with a price target of $29 (more than 100% upside from current levels). The price target does not consider off label sales which could, for example, result in peak sales for SU101 being $1.0 billion, or 4x higher than projected. Also rating Sugen as a buy are Hambrecht & Quist and UBS Securities. Note: cancer treatment is a high margin business, so $300M of sales can yield $180M in pre-tax earnings.
Insider Buying: Insider buying has been strong and there has never been an insider sale. Richard Spizzirri, an officer and director, purchased 30,000 shares in November 1997, bringing his holdings to 285,504 shares. Stephen Evans-Freke, Chairman and CEO, owns 718,469 shares. The remaining executive officers and directors (14 persons) own on average 160,000 shares each.
Business Mission: To build the strongest signal transduction based drug discovery platform in the industry. Signal transduction relates to inhibiting or stimulating a cells ability to divide. The process of deciphering signal transduction is today recognized as one of the major achievements of molecular biology. In fact, two Nobel prizes have so far been awarded in the field, including one to Sugen's science advisory board member Dr. Edmond Fischer.
Sugen's Baskets of Value Strategy: Sugen is building a vertically integrated cancer business. Cancer drugs in human trials include SU101 (brain, ovarian, prostate) and Flk-1 (most solid tumors). Sugen also has cancer drugs in pre-clinical development for tumors, chronic therapy, stomach cancer, lung cancer, etc. In addition, areas of development outside cancer include dermatology, immunology, ophthalmology, diabetes, cardiovascular, neurobiology, and diagnostics. The company has sufficient cash to fund its operations to the year 2000+.
SU101: Sugen's lead compound now entering Phase III of human trials. Trial results have been very favorable. Patients in Phase I/II trials were terminal and failed all conventional therapies, and with SU101 treatment some are still alive after 2+ years. FDA approval and market launch can reasonably be expected in 1999. SU101 has the potential to become a broad based cancer therapy.
FLK-1: This angiogenesis inhibitor is in Phase I of human trials. The drug prevents tumors from attracting new blood vessels and thus prevents tumor growth and metastasis. In fact, without angiogenesis, the tumors starve from lack of blood supply. Trial results have been very favorable.
Corporate Collaborations: Sugen has entered into a number of collaborations for the development and distribution of new drugs. Partners include Zeneca (owns 20% of Sugen), ASTA Medica (owns 5%), Allergan (owns <5%), and others.
Sugen Management: The academic background and experience of management as well as the board of directors is very strong. Stephen Evans-Freke, Chairman and CEO, formerly served as director of Genentech, Amgen, Centocor, and Genzyme |
