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

To: George Leeper who wrote (2260)	2/4/2000 3:19:00 AM
From: Asymmetric	Read Replies (2) \| Respond to of 3576

Can The Rally In Biotech Stocks Continue? By SIGFRIED HOFMANN and FELIX SCHONAUER Dow Jones Newswire: WSJE: Weekend - Money Matters - Feb 4, 2000 Handelsblatt Reporters (Interesting article. Geron would seem to fit in here. By the way: I'm long Geron. Peter) Biotechnology stocks, laid low by uncertainty in past years, seem to have recovered. The sector is one of the market's hottest this year. The Nasdaq's biotechnology index has gained more than 75% over the past three months. This upswing is a mixture of trend-buying, good financial results and fundamental revaluation. But behind the profits is break-through science. Scientists have come tantalizing close to unlocking the last secrets of the human gene pool. And huge pharmaceutical companies have demonstrated that they are taking the imminent breakthrough seriously by gobbling up small microbiology companies as the key to systematic drug development. "Gold rush excitement prevails at the moment for these stocks," said Oliver Kaemmerer, an analyst for Bank Julius Baer. This year, 17 genetic-engineering firms will likely go public in Europe - up from five last year (including four on Germany's Neuer Markt). "This rally will keep rolling," Mr. Kaemmerer added. Nonetheless, many of these biotechnology issues have left all normal valuation parameters behind and already show three-digit price-earnings ratios. The volatility of many of these issues is rising, and the price increases hasn't made choices among the 300 U.S. biotech stocks any easier. This has analysts, fund managers and branch executives wondering how long the fun can last. Although the duration of the rally depends on whether there has been a fundamental revaluation of the branch, a continuation of the breathless runup of recent months appears improbable. Warnings of a sharp correction abound, considering that many microbiology shares, in proportion to sales and earnings, now show the same euphoric values as Internet issues. Another cause for worry is the discovery of the sector by momentum investors and day traders. If they bail out, branch experts fear, prices could sink as fast as the rose. A few generalizations can be made about the entire branch by looking at the U.S. There, the biotechnology industry has already put 90 medicines and vaccines on the market and analysts say another 800 are in clinical testing, with about 350 in the final phase. The branch's pipeline therefore looks fuller than the combined development projects of the 10 or 20 leading drug companies. That's not entirely priced into the current valuation. Thanks partly to the price surge, the financial resources of these young companies have improved markedly. More and more microbiology companies are in a position to expand their arsenal of technology with acquisitions. Or, they can simply develop into integrated pharmaceutical companies, boosting their chances against the predatory giants. Biotechnology shares have also been helped in recent months by continual strides in product development and strong sales of genetically engineered medicines already on the market. The number of approved drugs developed with genetic engineering since 1997 has risen steeply and steadily. Examples are the arthritis drug, Enbrel, from Immunex, and the lung- infection medicine, Synagis, from Medimmune. Branch leaders Amgen, Genentech and Biogen have also rolled out strong sales figures for established products along with rising earnings and good reports from clinical testing. The sector's advances in development and marketing have increased the dependency of large pharmaceutical companies upon products from this field. That's reflected in the recent purchases of Centocor by Johnson & Johnson and Agouron by Warner Lambert. The widely heralded genetic revolution, it would appear, is gradually taking shape. Investigation of human genes is making rapid progress, promising a flood of information on the causes of disease and associated metabolic processes. The pharmaceutical and genetic engineering companies hope to derive new medicinal agents from this. Behind this development is a change in the paradigm of pharmaceutical research. In a field that once enshrined the serendipity factor, a belief has caught on that the medicines of the future will be developed almost exclusively on the basis of genetic knowledge. The branch's R&D strategists are increasingly convinced that the rapid decoding of human genes will open a narrow window of opportunity for the development of many new therapies. Upbeat forecasts hold that the molecule containing human genetic information with around three billion chemical building blocks will be completely sequenced before the end of this year. That would be the starting gun in a race to understand the functions of the genes and to patent the results. Pharmaceutical companies are prepared to pay escalating sums for the discovery of new targets for their active agents. Technology that can play a role in the research chain between gene and agent therefore acquires immense value. All this has finally forced the equities markets to take seriously the research claims that branch experts have been making for years. It was PE Celera Genomics, a U.S. company, which first announced that it would soon complete the sequencing of human genes. Until last year, the market had been focused primarily on genetic engineering companies that developed their own pharmaceutical products. Thus, investors were interested only in companies with the greatest market capitalization. The spotlight now focused on genetic research quickly put the microbiology rally on a broadened base. In recent months the upswing has also lifted companies that offer technology and processes for drug research. Biotech companies, led by PE Celera, now lead the U.S. microbiology sector. But it's not just the pure genetic research firms, including HGS, Millenium and Incyte, which are profiting. In the past year, investors also lionized the makers of gene chips; antibody specialists such as Abgenix and Medarex; companies from the field of organic chemistry, such as Pharmacopeia and Argule, and suppliers of services, including Qiagen and MWG Biotech. The boom has even benefited a small cluster of companies in Germany which provide the technological tools and equipment to conduct biotech research. The market value of Evotec and Cybio has more than tripled since their listings last October. First traded last spring, MWG Biotech has become a sparkplug on the Frankfurt market's venture-capital segment, the Neuer Markt, its share rising by more than 600%.