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Biotech / Medical : Incyte (INCY)

INCY 102.54

+2.1%

Dec 5 9:30 AM EST

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To: Michael Feldstein who wrote (644)	5/19/1998 6:39:00 PM
From: Andreas Helke	Read Replies (1) of 3202

I don't know where you got your PE of 70 but I assume that it is a ttm (trailing 12 months) earnings number. Trailing PEs are totally meaningless for a growth company. Nobody will pay you anything for past earnings of such a company. The important thing is what you will get in the future. With the 1999 earnings estimates you get a PE of about 40 which looks pretty reasonable for a leading genomics company with strong revenue growth. Incyte currently spends a lot of money to develop their future business therefore current earnings are not that important for judging the company. You can check future earnings at nasdaq.com where all available estimates for NASDAQ listed companies are shown and not only 2 years like Zacks is doing. For Incyte we get 1998 $0.747 1999 $0.964 2000 $1.6 2001 $2.05 2002 $2.28 Nobody really has figured out who to valuate biotech companies. With the successful ones you can expect huge future earnings. But the difficult thing is to figure out how likely it is that those earnings actually will materialize. Some companies like Ligand look cheap and stay that way for years. One analyst has done a 10 year forecast for Ligand earnings and figured out earnings per share in 2006 that are about as high as the current stock price. Others like EntreMed get expensive over night just on the hope that a drug candidate will turn out to be a wildly successful drug. I have ignored the genomics companies for a long time and preferred to just buy more of that cheap Ligand stock or more Agouron at $50 that later turned out to be not that cheap. I started buying Agouron for $20 and $15. The current price is $35. Compared to most other biotechs Ligand looked like a huge bargain for much of the last two years. But when I finally head too much Ligand stock in my portfolio I took another look at the genomics field and started buying. I now have shares of AFFX, INCY, MDYN and MLNM. With Incyte I started with just a few shares at $50 and pretty exactly hit the top. When I could get shares for $45 I doubled down. I doubled my shares again for $42.50. When Incyte hit my next target price of $35 I had no money left and had to pass on the opportunity. Andreas

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