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Biotech / Medical : VD's Model Portfolio & Discussion Thread -- Ignore unavailable to you. Want to Upgrade?

To: Don Miller who wrote (6933)	7/24/1999 7:25:00 PM
From: Vector1	Read Replies (2) \| Respond to of 9719

Don, There are a number of interesting ways of playing SEPR. The three best attacks are (i)straight stock ownership (ii) 01 or 02 leaps or (iii)convertible bonds. SEPR has very high volitility and this is reflected in the option pricing. SEPR leaps are very expensive. The ask on the Jan 01s is 28 and 5/8th. The stock needs to jump almost 30% in 16 months to just break even. If the stock is flat you get wiped out. Of course on the upside you can buy almost three times as many leaps as stock so if the stock triples for instance (which is certainly possible with SEPR)you are way better off. I like the leaps because IMO there is a high likelihood that we and the market will know whether ICE's are all they are cracked up to be by then even thought the company will still probably be loosing money given the likely R&D spend. On the risk side many things can go wrong which will mess up the timing and could render the leaps worthless. Among them are a major stock market correction and the failure in the clinic of one of SEPR's ICE's or the loss of a patent. It really comes down to a question of your appetite for risk. One way to look at it is to come up with what you beleive is the range of likely SEPR stock prices in Jan 01 and then run out various cases. I would also look at different leaps or maybe a mix. As of Fridays close the asks were:Jan01's 100- 22 1/2 110-19 1/2 120-16 1/4 130- 141/8. Another safer way to play SEPR is to buy the converts. I have not looked carefully at these but there is a lot of safety in owning debt of SEPR given the underlying value of the patents and royalty stream. Hope that helps. One of the reason we haven't done it in the thread is lack of time. However, SEPR is an excellent candidate to play an option. v1