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

To: Biomaven who wrote (593)	1/28/2000 1:02:00 PM
From: Torben Noerup Nielsen	Read Replies (1) \| Respond to of 52153

Peter, I'm mostly focused on the biotechs that can be expected to turn profitable by the end of this year. And for those, I simply do not see the relevance of interest rates. Take Gliatech. Barring anything really major, they'll turn profitable this year. Given their relatively low market penetration and the massive growth rate expected, it seems silly to me to consider interest rates at all. In general, I agree with your model. And the conclusion I'm coming to is that a 50 point increase by the Federal Reserve might actually be good for us as I'd expect it to actually increase the flow of money into biotech. All those funds have to have something to show by the end of the year.... Thanks, Torben

To: Biomaven who wrote (593)	1/28/2000 5:12:00 PM
From: schadenfreude	Read Replies (1) \| Respond to of 52153

A couple comments on the interest rate issue. Short-term rates are moving up, but long-term rates have been relatively stable. I would view an increase in long-term rates much more negatively than the recent rise in short-term rates for a couple of reasons. First, the rate used to discount future cash flows is on the long end, usually the 10-year Treasury. Unless long-term rates move, valuations are unaffected. Second, long-term rates are much more a function of the market's confidence in the Fed's commitment to hold down inflation over the long haul than the strength of the economy or small blips in inflation. A major increase in long-term rates could be a signal that the market has lost faith in the Fed and is pricing in more inflation risk. This would have a serious, lasting effect on stock valuations.