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

To: N/E PATSFAN who wrote (1319)	7/9/2000 10:39:38 PM
From: Biomaven	Read Replies (5) \| Respond to of 52153

NEPF, Yes indeed, I do follow IGEN pretty closely, and also hold some. It's a stock that has the potential for many multiples of appreciation, but may just sit here and never take off. My advice has been that it may be one of the rare stocks that it makes sense to wait for it to go up before buying. In other words, give up the first double and join the bandwagon a little later. It's fundamentally a razor/razorblade story - their machines are good, but their long-term captive reagent market is even better if they can penetrate the market. They are addressing multiple markets. Biggest revenues up to now have come from their Roche license for diagnostic testing in large labs. This is where they are claiming Roche has been cheating on them, and up to now IGEN has been winning in court (Roche selling to markets not permitted by their contract). This is a multi-billion dollar market for Roche, and in my view Roche can absolutely not take even the small chance that a court would order them to give up their license to the IGEN technology. Thus I think Roche will ultimately settle; meantime, however, they are very much playing hardball. This could easily drag on another year however, but there is always the possibility of an explosive upmove in IGEN if it settles favorably. (An argument perhaps for playing this with long term calls). The other significant market that IGEN has entered on its own is the high-throughput testing market. It's a little early to tell how this is being received, but they currently seem on target to meet their initial sales goals (100 machines in first year). Each machine produces from $40k to $400k in annualized high-margin revenue from reagent sales. A third market down the road is point-of-care (POC) testing. This puts a smaller version of their machine in doctor's offices and ER's instead of sending stuff away to a central lab. Potentially a big market, but getting doctors to change is hard. Finally they do food and water testing. Their e coli test claims to be the fastest and most sensitive on the market - it's newly introduced and so far they have only announced one sale. All these markets use the same technology. Mangement is a little unclear to me. A strong leader, who basically feels they should adopt an Amazon-like approach to dominating the market, irrespective of short-term results. I think he's probably right on this. Some amount of funding of a venture by his son - something I don't care for on principle. Short term results are being hurt badly by the litigation costs and by Roche suddenly deciding to take a deduction on the way royalties are being calculated (apparently based on the fact that they sell their machines cheap and make the reagents expensive. Not something explicitly addressed in their contract, and indicative of their hardball approach). Bottom line though is that I see the stock as still cheap, even after its recent partial recovery. There are not many cheap biotechs with potential for major appreciation left. There's been some selling from a Soros-related group which might have something to do with the weakness. I don't have a large position, but did add in the recent dip. On any good news I'll likely add some more. One warning though is that I've never been able to interest other SI biofreaks in this stock, and up to now they been pretty smart to ignore it. Peter