SCIOS UPDATE: { Compliments Linda Pearson }
From TheStreet.Com yesterday:
H&Q Health Care Conference Notebook: When You're Hot, You're Hot
By Jesse Eisinger
Senior Writer
1/14/99 11:30 AM ET
SAN FRANCISCO -- Like the biotech industry as a whole, the Hambrecht & Quist Health Care Conference here is a story of the haves and the have-nots.
Some rooms are jammed with investors. And not just the rooms with the health-care Internet plays that are being flogged relentlessly, such as drugstore.com and PlanetRx, neither of which has even gone public. (Don't ask what they do, just buy IPOs and hope they pull a Broadcast.com (BCST:Nasdaq).) Select biotech names also were packed to the gills.
Sugen (SUGN:Nasdaq), which said Wednesday that it would move from Phase I right into Phase III with its anti-angiogenesis cancer drug, had a standing-room only presentation. Never mind that it's a classic biotech mistake to go right from Phase I to Phase III, and that companies will always say their data warrant the accelerated timeline. For Sugen, and many of the big biotech names, H&Q should have rented those guys in the Japanese subways who jam people in at the doors.
But other presentations looked like the rooms were hit by neutron bombs. At Cephalon's (CEPH:Nasdaq) presentation Wednesday in the Grand Ballroom, you could practically hear echoes. No one wants to touch the smaller names or companies that have blown up. Just the ones with momentum, please.
And that might make investors cautious in the short to mid-term. Typically, the biotech bull rallies that start at the beginning of the autumn scientific meeting season come to an end after H&Q. "Every year, it happens. You buy the sector one month before ICAAC [the anti-viral meeting] and you sell after H&Q," says a New York money manager.
Meanwhile, the drug stocks, not as dependent on the cycle of news and hype as biotechs, were weak all week. Pharmaceutical stocks have suffered because investors began figuring the economy was stronger than expected, which drew money into cyclical stocks and away from "defensive" stocks such as the drug companies.
Pfizer (PFE:NYSE) had been getting creamed. But the change in sentiment in the stock market Wednesday may alter that. One New York money manager, asked why Pfizer was down so much in recent days, said giddily, "Because of the group. But that all changes today with Brazil. We're back!"
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One Boston hedge fund manager was enthusiastic about Scios (SCIO:Nasdaq), which has a drug called Natrecor for chronic heart failure. The company submitted its new drug application with the Food and Drug Administration last April. Typically, it takes about a year for the FDA to process these filings. The company has an FDA panel meeting Jan. 29 to review the drug for the short-term treatment of CHF, a disease where the heart muscle is too weak to pump blood to the rest of the body.
At a little more than $375 million market cap, Scios isn't dirt cheap. But CHF could be a large market. There are 400,000 new cases a year and one million sufferers in the U.S., and there are few treatments. Most patients are treated with diuretics, which have been around a long time and are generic. Eventually, the drug could sell a couple of hundred million dollars a year, analysts predict.
The hedge fund manager, who owns the stock, says that the company has $2 a share in cash and will receive around $40 million from its partner on Natrecor, Bayer. He says that the company is sitting on about $20 to $30 million of real estate but that it plans to move to a smaller facility. That could bring in an additional $20 million.
Scios burned investors years ago, so people don't like the name. That's why the hedge fund manager likes it: "If it's got hair on it, people don't like it. No one owns this thing."
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