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Biotech / Medical : Sepracor-Looks very promising -- Ignore unavailable to you. Want to Upgrade?

To: David Howe who wrote (3677)	9/8/1999 4:10:00 PM
From: j_fir2	Respond to of 10280

Dave, I'm still hoping Xopenex will be a blockbuster. It could happen, right? A "clean," effective treatment for asthma might reach a very wide market. Time will tell. Seems like the stock is moving more like a pharmaceutical than a biotech these days... As Mazen would say, "good luck!" j'fir

To: David Howe who wrote (3677)	9/8/1999 8:48:00 PM
From: Ed Ajootian	Read Replies (2) \| Respond to of 10280

Dave, Sturza's 9/2 fax on SEPR says the royalty rates will be 4% of US sales and "approximately" 7% on ex-US sales. Tried calling Jonae to get a response regarding these statements but she's on vacation and a general message to IR was not returned. Also, Sturza is your kinda guy because he estimates Allegra US sales will be up to $1.1 billion by '01, resulting in royalty revenue of $46 mm to SEPR. The ex-US sales are running at just $68 mm a year (an astounding difference from US sales it seems). So we are looking at current additional royalties of only about $5 mm/yr. right now. Maybe that's why no one seems to be getting very excited about this deal. I have continued to aggressively re-build my position in this stock on this news. IMO this news has far-reaching implications, for reasons that are now somewhat non-obvious but which will become very apparent over the coming year. The key point is that this extra income coming in '01 dramatically increases the possibility of SEPR being bought out, IMO. Being in the black no later than by '01 would be very critical for a potential target IMO. The big reason for this is that the FASB is gonna prohibit companies from using the "pooling" method of accounting for acquisitions after 12/31/00. Pooling treatment is a great deal for an acquirer since they don't have to put up goodwill on the books, which drags down earnings as it gets amortized. I believe the only way any of the big pharma's would even be able to consider buying SEPR is if they could use the pooling treatment. This means that they would have to initiate the deal by a year from this New Year's. The big pharma's, being all earnings driven, also could only buy a company that had very visible, near-term earnings lined up. Otherwise, the acquisition would be dilutive and the acquiring company's stock would get trashed on the acquisition announcement. So now that SEPR will be generating another $46 mm in revenues from 2/01 on (the HMR Allegra patent expires in February '01), this solves the dilution problem that otherwise would have been out there for an early '01 acquisition of SEPR. IMO, starting about a year from now, there will be a mad rush by profitable companies to acquire development stage technology companies that are right on the cusp of turning profitable, so that they can be able to use pooling treatment of the acquisition before the window closes. SEPR will be precisely the kind of target company that would fit this description. As always, would welcome all comments, corrections, criticisms, etc.