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Biotech / Medical : Biotech Valuation -- Ignore unavailable to you. Want to Upgrade?

To: scaram(o)uche who wrote (445)	10/22/1999 3:43:00 PM
From: Biomaven	Read Replies (1) \| Respond to of 52153

Today we got some indication of what Mr Market thinks Biogen's anti-CD40L program is worth. He (I guess Mr. Market is indeed male) knocked off about $1 billion off BGEN's valuation. If we assume he thinks the program is only 50% dead, that would make the implied value of the program $2 billion. Kind of pricey for a Phase II, but then again it has $1 billion/yr potential. BTW, IGEN was up sharply today on no news that I saw. My view is that people should have a few IGEN calls tucked away in case it settles with Roche. Peter

To: scaram(o)uche who wrote (445)	12/3/1999 4:00:00 PM
From: Biomaven	Read Replies (2) \| Respond to of 52153

Time for some overall valuation thoughts. Clearly we've had a frenzy the past few days in the gene stocks (CRGN, GLGC, AFFX, HGSI, INCY, CRA, MLNM, etc.) and for a few months now in the Mab stocks (ABGX, MEDRX, PDLI). November overall was an incredible month in the stocks I hold and follow, and so far December is continuing on. Clearly this rate of increase will not last for much longer, but it's very hard to predict when it will stop. Certainly for stocks that have the right "story" and continuing streams of good news, traditional valuation techniques have to be disregarded for now, and sometimes you just have to bite the bullet and buy a stock you could have gotten for half the price not so long ago. One interesting thing to examine is a graph of the BTK index vs. the DRG index. I only have this going back to July 1997, at which point it was about .55 . It then rose to a high of .78 in October 1997, and then commenced a steady decline to a trough of about .35 in August 1998. It then turned around and commenced an equally steady rise back to its old .78 high in September this year. We then had a drop to the .65 level in late October, followed by a rise back to the .78 high currently. Remembering that the BTK index is heavily weighted to the first tier, we are still at a historically high valuation of the biotechs relative to the pharmas. To some extent this is a measure of "pipe" value as opposed to "product" value, although less so given the increased product sales in the big bios. Partly this relative valuation reflects some disillusionment with the pharmas, as the realization sinks in that they will be hard pressed indeed to maintain 15-20% growth rates in the long term given drug cost-containment measures, patent expirations and shaky pipelines. (Maybe I'll try to put together a true product vs. no product chart over the past few years to get a better notion of the changing valuation metric.) My prediction is that the BTK will continue to perform better than the DRG over the next few years - maybe reaching parity at some point. (Partly depending on what flaky stocks they choose to include in the BTK index of course). Meantime, here is a list of Nasdaq $5 billion stocks with no earnings: Message 12172288 In the next post, I'll attempt a listing of current pharma and biotech market caps. Peter