Mudcat, Since some seem to think that LGND is something like DELL or INTC and others don't understand the difference between Biotechs and big Pharmas, it might be time for a quick review.
Of course different investors have different views, I'll give some reasons why some investors might rotate out of high tech and into a Biotech like LGND.
The stock market in general has had a nice run. Many have seen nice returns over the years. As money continues to come into the market, the valuations continue to rise to historic levels. Some will use the INTC announcement as an excuse to take profits. Everyone understands the wisdom of buying low and selling high, but it's not always easy to call highs and lows (although some do a great job using hindsight).
High techs have made nice gains as have big pharmas. Those looking to rotate, may see that Biotechs have under performed.
Biotech's under performance can be fairly easily traced to poor clinicals. Most don't make money, but their progress in bringing drugs through regulatory milestones is a good predictor of future earnings. If a drug fails, future profits will be impacted. Some Biotechs are fairly concentrated in one or two products. A failure in an advanced product can generate a major haircut. Even loss of support of a major partner can have a major impact on share price.
Last year Biotechs were expected to show some significant progress. The sector has matured and many drugs were in advanced trials. Unfortunately, most of those trials failed. In the past, one failure could impact the entire sector. Today, there is much more diversity and a much broader base of products in trials, but failure after failure does take its toll.
Many are recommending Biotechs as a sector with a great deal of potential. However, investors are warned that selectivity is required.
LGND is well positioned to attract new investors. It has many partners (PFE, GLX, AGN, ABT, AGN, Sankyo, LLY) which is a good sign because these major pharmas have a better handle on evaluating technology and products than the average investor (big or small).
LGND also has cash. Since most Biotechs don't generate income from product sales, having sufficient cash to carry the company to profitability is a major plus.
LGND has an excellent pipeline. Many, including LGND, consider it the best in the sector. LGND is expected to file an NDA this quarter. That's another major plus be cause it is a prerequisite for a product and experienced management will not file an NDA unless it has an excellent chance at being approved. LGND's senior management is almost exclusively from big pharms, all of Panretin topical clincals have been very positive, and the drug has an excellent safety profile. Moreover, LGND many file three more NDAs this year,which may be unprecedented for a Biotech and is quite impressive even for a pharma with a market cap over 100 times larger than LGND's.
I could go on and on, but there are many good reasons why investors could rotate out of high tech and into Biotech, and it's very easy to make arguments on why LGND is an excellent Biotech for the long (and short) term investor. |
