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

To: scott_jiminez who wrote (1373)	8/2/2000 5:05:49 PM
From: Jim Oravetz	Respond to of 52153

The Biotech Blowup Bounce WHEN A DRUG COMPANY like Cephalon (CEPH) gets clobbered the way it did Monday, it should hardly come as a surprise. After all, stocks of small pharmaceutical and biotech companies pumped up on the promise of a hot drug in testing routinely plummet when those tests fail. But does the failure of a lead drug turn a company's stock into poison? Not necessarily. ....The point here is this: Investing in biotech is always a risky roller-coaster ride. But the market depression surrounding the average lead-product disappointment can also create some prime opportunities. Indeed, jumping in after bad news can sometimes be quite a bit less risky than piling on with the rest of Wall Street when the news looks good. Had you bought Protein Design near that second peak of $338, for instance, you'd have lost an ugly 64% by now. How do you know when to take a chance on a biotech blowup? The key is the pipeline. If you do your homework and the company has more than just one promising product in its mix, chances are that value will eventually be recognized. This week's blowup is an interesting case study. While not a biotech company per se, specialty pharmaceutical standout Cephalon got hammered Monday when it announced that its one established drug — narcolepsy-fighter Provigil — isn't effective against attention-deficit-hyperactivity disorder. Cephalon stock dropped 36%, in part because the company had previously said its profits depend on finding other uses for Provigil. But the game is certainly not over for Provigil or Cephalon. One analyst, Eric Schmidt of SG Cowen, upgraded the stock just after the 36% plunge Monday, saying that only a very small percentage of prescriptions of Provigil was for attention-deficit-hyperactivity disroder. Meanwhile, he said Provigil, at least in clinical trials, shows signs of fighting sleep apnea and other sleep and fatigue disorders. snip<> Others mentioned: AGEN, XOMA, PDLI, PGNX smartmoney.com Jim

To: scott_jiminez who wrote (1373)	8/2/2000 8:58:50 PM
From: IRWIN JAMES FRANKEL	Respond to of 52153

Scott, I know you introduced the idea of valuation in starting the series of posts. Whether we think it rational or not the market establishes valuations across industries and companies. At times it is not rational. At times we just did not understand facts that the market seems already to have digested. KLIC is a timely example. Since peaking at 43.625 (2/1 adj) it has slid to close at 22 despite record earnings. It seemed irrational. [But note that the caution offered by another poster as to the proper PE for peak earnings is fitting.] After the market closed, Scott warned for the next 2Q's. The market as it likes to do will overreact and take KLIC into the teens. All the while, SEPR, ALXN and PDLI will rally. Argue valuation if you like but the market is, at least for now, treating these stocks very differently. ij PS - I own KLIC also, ouch!