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

To: johnsto1 who wrote (1162)	6/2/2000 8:06:00 AM
From: Jim Oravetz	Read Replies (1) \| Respond to of 52153

[BRIEFING.COM - Robert Walberg] Back on March 10, Briefing.com issued a Brief on the Biotech sector entitled, Biotechs: Not Again. In that Brief, we argued that the sector would not repeat the fate of the early 80's, when biotechs surged only to plunge for a prolonged period. Based on the group's miserable performance over the past few months, many of you have written to tell us that our conclusion was wrong, that the biotech industry is indeed reliving the boom and bust cycle of the 80s. Not true. Without question, the past two months have been dreadful for the biotech sector. But only a myopic view of the sector suggests that it is headed for a prolonged downturn. As the table below clearly illustrates, while many biotech stocks have come back to earth over the past several weeks, investors who have been long biotech for the past year are still way ahead. Stock 6/1/00 Close 52-Wk High % Off High Year-Ago Close % Change Past 12-Mo Abgenix (ABGX) 88.25 206.5 -57% 7.3125 +1107% Affymetrix (AFFX) 131.5 327 -60% 35 +276% Biogen (BGEN) 56.8125 129 -56% 54.031 +5% Celgene (CELG) 37.125 62.3125 -40% 5.208 +613% Cephalon (CEPH) 55.25 74.375 -26% 13.625 +306% Chiron (CHIR) 39.25 71 -45% 20 +96% COR Therapeutics (CORR) 62.8125 103.875 -40% 13.8125 +355% Genentech (DNA) 108.125 245 -56% 63.5 +70% Gene Logic (GLGC) 25.25 152.5 -83% 4.375 +477% Gilead Sciences (GILD) 56.625 95.5 -41% 43.5 +30% Human Genome (HGSI) 91.5625 232.75 -61% 21.1562 +333% IDEC Pharmaceuticals (IDPH) 75.125 173 -57% 29 +159% Immunex (IMNX) 25.5 83.5625 -69% 20.4375 +25% Incyte Pharmaceuticals (INCY) 60.125 289.0625 -79% 24 +151% Isis Pharmaceuticals (ISIP) 10 39 -74% 9.75 +3% Ligand Pharmaceuticals (LGND) 10.75 26.5 -59% 10.0625 +7% Medimmune (MEDI) 164 228 3/4 -28% 62.875 +161% Millennium Pharmaceuticals (MLNM) 92.875 158 -41% 18.75 +395% Myriad Genetics (MYGN) 79 232.125 -66% 10.125 +680% Vical (VICL) 20.625 73.5 -72% 10.75 +92% Two things jump out from the table. One, while the average drop from the highs is 54%, the average year/year gain is a whopping 277%. Almost as impressive as the average gain, is the fact that of the 20 stocks chosen to represent the biotech sector not one is trading below its year-ago level. Hardly, the stuff of a prolonged bear market (at least not yet anyway). Basically, these numbers confirm what Briefing.com has been saying on our pages for some time. The current downdraft is about wringing out the excesses of the November to March surge. During that period, emotions, not fundamentals, drove biotech shares sharply higher. Investors with very little understanding of the sector chased stocks on analyst upgrades, favorable press releases and/or chat room hype. Junk soared right along with quality. Those days are over, at least for the foreseeable future. But what is not over is the long-term industry upturn. Far from it in fact. At present, there are more drugs/therapies in the later stages of clinical development than at any time in history. Driven by advances in technology that have made it faster and cheaper to discover new drugs/therapies; a more favorable political and regulatory climate; the aging of the population; and the adoption of the collaborative business model, the biotech industry is positioned for explosive growth in the years ahead. To take part in that growth investors need to be mindful of a few things. First, the sector is very volatile and not particularly conducive to short-term trading. Second, it will take years before many of these companies see the fruits of their labors pay-off in meaningful earnings. Finally, selectivity is very important. Briefing.com maintains that investors should stick with those companies that have ample cash holdings, a strong pipeline of drugs in the later stages of development, a proven management team, and numerous collaborative agreements with well-matched pharmaceutical companies. Despite the sector's recent weakness, and the very real possibility of additional near-term declines, Briefing.com contends that patient, growth-oriented investors holding a diversified basket of quality biotech companies will not only beat the market, they'll destroy it. Jim