GelTex Pharmaceuticals (GELX) Message Board

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Biotech / Medical : GelTex Pharmaceuticals (GELX)

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To: Robert L. Ray who wrote (67)	8/19/1998 2:35:00 AM
From: Robert L. Ray	Read Replies (1) of 127

To all, I posted the following to another message board this evening and since this board is so dead of late I thought I'd do a cut and paste here. The factual information contained is I'm sure well known to most here and the opinions are....... well heck you know what they say about opinions:) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX I feel that Geltex Pharmaceuticals is a screaming buy at $22 a share. It's actually held up fairly well in the recent biotech meltdown. Too bad in a way because I'd have liked to have bought more at a bargain price. I've invested in medical stocks for many years and have had my winners and losers but this is only the second stock I've felt strongly enough about to start a board on. (The other being OSTE which went from 6 to over 30 and is now in the low 20's) Truth be told I'm starting this board in the hopes that a little bit of that luck?:) might rub off on Gelx. (Not that I'm superstitious:) GELX's lead product (Renagel) for Phosphorus control in kidney dialysys patients is all but approved by the FDA. They've already started producing it in a full scale plant run by a third party. Of course the market is well aware of this and it is thus probably 95% priced into the stock. Still my guess is that it will get a point or two pop on the day the approval becomes official. They are in a 50/50 partnership with GENZ on Renagel. Their next product (Cholestagel) is currently in phase 3 testing for cholesteral control. This is the biggie:)) The market potential for Cholestagel is probably at minimum 2-3 times that of Renagel. And I personally don't feel that the market is giving them nearly as much credit for it as they deserve. (There in lies the opportunity:) The FDA of course is a tricky outfit to deal with. Generally speaking the stock price of a company doesn't deserve to 100% (or even 50%) reflect a successful outcome to phase 3 testing because so many products wind up not being approved or have limited market potential once approved. There is generally a pretty large risk factor. This is the reason why GELX is such (IMHO:) a bargain at the present time. I may be going out on a limb here but I feel there's at least a 90% change that Cholestagel will be approved and be sucessful in the marketplace. And the stock market is reflecting very, very, little of this. Why do I feel so strongly about this? Well two things determine whether a drug is approved or not... Safety and effectiveness. The type of drugs that GELX develops are inherently safer than most drugs because they don't absorb into the bloodstream. They act in the intestinal tract by absorbing various substances. So because of this they don't cause nearly the number of side effects that most drugs do. Also Cholestagel is deeply into phase 3 testing and the results so far have been very good. The really good thing about a cholesteral med is that it's so easy to measure the effectivness of whether is works or not. Probably a lot a drugs that deserve approval wind up unapproved because of the vagarities/difficulties of determining whether is was effective or not. With a cholesteral med it's pretty much black and white. Check the cholesteral reduction in the bloodstream measuring a certain drug vs. a placebo. It's really not subject to a lot of interpertation. It either works or it doesn't. There's solid numbers to go by. Sorta analagous to a timed event in track and field vs. judging gymnastics or figure skating. At the moment there are two main classes of cholesteral medications. Bile acid sequestrants (of which Renagel is one) and the "Statins" such as Mevacor, Lipitor. The Statins are very effective at reducing cholesteral. Previously the B.A.S.(for short) were not nearly as effective and were much more difficult to take. Even Renagel is not as effective as the Statins, but it's head and shoulders above the current B.A.S. and has a much better side effect profile than either the Statins or the other B.A.S's. It has already shown to be effective in clinical trials which are ongoing. I apologize for not having the exact figures on what percentage it reduces cholesteral (I'm doing this from a not so great memory) but suffice it to say that the cholesteral reduction it provides falls between the Statin's and the older B.A.S's. It acheives this effectivness at much lower doses than the older B.A.S's. The older B.A.S.'s require a dosage of between 25-30 grams taken with a large amount of water and they tend to cause constipation. Cholestagels final dosage level hasn't really been set in stone yet but it should be somewhere between 2-5 grams and hasn't shown the same constipation problems the older drugs have. Also keep in mind that the Statin class of drugs have side effects which effect the liver in some people. When people first go on them they have to have blood tests to check liver function/enzymes. This will not be required with Cholestagel since is isn't absorbed into the bloodstream. I recently saw some 1996 figures which put the worldwide sales of the Statins at 5-6 billion and the U.S. sales of the B.A.S's at 100 million. Renagel's greater ease of use, lower side effects and greater effectiveness should (strictly my opinion) take 95 million of the current B.A.S. market, plus greatly expand the market for the B.A.S class of drug. It should in the very worst case scenerio double the market. And to tell the truth I would be totally shocked if all it did was double the market. A more realistic guess would be sales of 300-600 million. (Keep in mind the 100 million figure I gave was for 1996 and for U.S. sales only) The market just hasn't woke up to all this yet. There's tons of biotechs out there and sometimes a gem isn't recognized among all the clutter until after it's taken off. The market psychology is that biotechs are risky and that very, very, often drugs don't get approved. And this psychology is entirely justified. The past is a great predictor of the future:) But occasional exceptions must be made. Here we have a stock whose drugs are inherently safer than other drugs by the very nature of their design, and with one drug all but approved and another deep into phase 3 testing which has shown to be more than effective enough to warrent approval by testing which is really not open to all that much interpertation. I feel the market is vastly underestimating the potential for this drug. It's very easy to look at the current B.A.S. market and with a knee jerk reaction say ... What's the big deal? it's only a $100 million market. The market simply hasn't caught on that a superior B.A.S. will expand this market. And the market hasn't caught on to the fact that by it's very nature Cholestagel has a much greater potential for approval than the average drug in phase 3 due to a low side effect profile and already demonstrated effectiveness which is not open to the vagarities of a lot of interpertation. Another item is that GELX is now testing Cholestagel in combination with the Statin type of drugs and has had very good results in this area. So far GELX hasn't partnered with anyone for the marketing of Cholestagel. My guess would be that Merk is taking a serious look at partnering with them. Mevacor (a Merck drug) is the drug that Cholestagel is being combined with in the clinical testing. Hopefully whoever they wind up partnering with they will at minimum get the same 50/50 sort of deal that they did on Renagel with Genzyme. The financials are excellent. 16.7 million shares outstanding for a market cap of 367 million. And they have at last count 108 million in cash and equivelents. Throw in that they get a 15 million payment from Genzyme upon Renagel approval. (Probably in Nov-Dec of this year) and another 10 million from Genzyme a year after approval. And this doesn't count any milestone payments they may possibly get from whoever they partner with on Cholestagel. Well I think I've said enough for now.

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