Zonagen (zona) - good buy? Message Board

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Biotech / Medical : Zonagen (zona) - good buy?

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To: Dauntless who wrote (3252)	4/5/1998 11:17:00 PM
From: Steve H.	Read Replies (1) of 7041

SGP is hedging a bet. At $10M, SGP has guaranteed itself exclusive sales and marketing rights to a drug that shows some promise of being approved. As a percentage of their total R&D budget, the investment is tiny. Now, they have a new drug in Phase III without doing any of the R&D. Cheap for $10M. If it fails, it's a write-off (and a small one at that). SGP has no exposure (other than the $10M) if this product, or if ZONA, fails altogether. Are they bullish on ZONA? No. They're just securing a piece of the pie if this startup company manages to become successful. Just because they have exclusive sales rights to the product doesn't mean that they will push the product over their own products with their limited sales force. That is to say, SGP's product representatives get a limited amount of time with physicians. Will they use that time to detail a high margin SGP product or a lower margin (and marginally effective) Vasomax? Pfizer is opening a new market for ED drugs. Viagra is a new molecule; who knows what Thalidamide nightmare lurks around the corner? Vasomax is based on an old molecule that humans have had years of experience with. SGP guarantees number two in the market with very little investment and gets number one if Pfizer stumbles. That's just good business sense. On another note, Pfizer is not concerned about Vasomax. It's just a tool to incent their sales force to grab market share before the enemy get's approval for their product. FTR, I am long on Zonagen and Pfizer

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