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Biotech / Medical : T/FIF Portfolio -- Ignore unavailable to you. Want to Upgrade?

To: scaram(o)uche who wrote (1056)	1/21/2000 4:35:00 PM
From: scaram(o)uche	Read Replies (1) \| Respond to of 1073

thread still closed "biotech goes down in the summer"....... My, how things change! Nice to have you as a sector bull, KvE..... Friday January 21, 3:54 pm Eastern Time worldlyinvestor.com Fund Talk Investing in the Red-Hot Biotech Sector By Shannon Turner, Correspondent Franklin Biotech Discovery is a pure-play biotech fund looking to repeat a fabulous '99. If pure biotech is the right prescription for you, check out the Franklin Biotechnology Discovery Fund (Nasdaq:FBDIX - news) -- but you better hurry. The fund is closing its doors to new investors as soon as it hits $500 million in assets. Worldlyinvestor.com last spoke with Kurt von Emster, manager of the Franklin Biotechnology Discovery Fund, back in April. The fund was then down 6% so far that year. Well, a lot can happen in eight months. The fund finished 1999 up a whopping 97.9% and is the highest-ranking health fund in terms of total returns for one year, according to Morningstar. Already this year, it's up 20%. The fund also more than quadrupled in assets over the last year, to $310 million. At the $500 million mark, the fund will close to new investors in order to ''protect everyone who's in it and who wants to get in it,'' explains von Emster. Looking ahead, von Emster thinks 2000 will fundamentally be a stronger year. But whether the fund's going to be up another 100% is harder to say. He focuses on a three-year picture, and says he's comfortable with that outlook. The Year For Biotech Von Emster attributes the fund's great performance last year to a rally that was demand-driven and constrained by supply. As investors looked for undervalued tech stories in a market that was awarding incredible valuations to anything tech-related, biotechs seemed to fit the bill. He also noticed a huge inflow of money as many health care fund managers stocked up on the biotech sector in the face of poorly performing pharmaceutical issues -- though in fact only 14 biotech companies were actually profitable last year. Estimates for next year are more promising with more than 40 companies expected to post profits. Another factor boosting the biotech craze was Pharmacia & Upjohn's (NYSE:PNU - news) acquisition of a small biotech firm for a 100% premium. Johnson & Johnson (NYSE:JNJ - news) followed up with its purchase of Centocor. The prices these companies paid for their acquisitions were substantially higher than the public valuation of these stocks. For the biotech sector, this was just what the doctor ordered. In fact, von Emster was prescient back in April when he predicted many pharmaceuticals would run out of products soon, and the biotechs would be well positioned as potential merger targets for big-cap pharmaceuticals seeking to save their slumping stock prices. The next trend von Emster sees is biotech firms buying other biotechs. Genentech (NYSE:DNA - news) recently got board pre-approval for acquisitions up to $2 billion. ''A lot of these companies are rich in cash, but poor in product, so I think internally, there will be some cannibalization.'' Both Large and Small The fund's top holdings haven't changed much since last spring with Amgen (Nasdaq:AMGN - news) Biogen (Nasdaq:BGEN - news) and Genentech still among the top ten holdings. While the fund does invest in large-cap biotech stocks, von Emster also looks for those companies that aren't on many investors' radar screens. As a larger fund, he has to buy more shares of a favored stock to get the impact on his performance. On the other hand, he doesn't want to wind up owning a large chunk of the company. Von Emster still likes Inhale Therapeutics (Nasdaq:INHL - news), which has more than tripled since our last interview with him. ''They have finished the phase three trial of their insulin inhalant and have a marketing partnership with Pfizer (NYSE:PFE - news), which helps verify that this company gets the attention it deserves.'' Another for von Emster is MedImmune (Nasdaq:MEDI - news), which makes a drug that helps premature and low-weight infants suffering from a virus of the respiratory system. Von Emster readily admits that with the stock trading at more than 100 times earnings, the fundamentals ''stand out like a sore thumb.'' But he defends the valuation by citing the lack of competition for the product. ''Revenues are basically an annuity,'' he says, adding that the drug faces an expanding market in the elderly population. One particularly hot area in biotech is the work being done on the human genome, von Emster points out. ''Scientifically, we've reached an inflection point where we can sequence the entire human genome. The next work will be to get the map of the DNA and then determine how each DNA is related to disease. Investors know it will happen, so many are in the mind set of 'let's just get in now.''' The fund owns some of these related companies, but for the most part, von Emster believes many of these companies don't make sense from an earnings standpoint. The fund's holdings in this area are high-flying Celera Genomics (NYSE:CRA - news) and PE Biosystems (NYSE:PEB - news). Minimum initial investment in the fund is $1,000. Class A shares have a front-end load of 5.75%.