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

To: scott_jiminez who wrote (1397)	8/5/2000 1:11:35 PM
From: Spekulatius	Respond to of 52153

BT valuation - the irrational oscillations of biotechs is exactly the reason why I love to speculate and to invest in them. The second reason is that i have access to quality information here on threads like the one here on SI. The valuation method, i prefer to use is the relative valuation against peers.I also look at the absolute valuation of the whole sector and try not to buy at the peak. That said, I think there are a couple of different approaches for active value oriented investors: 1) Quality approach: Buy (and possibly cost average) and hold stakes in quality companies with strong fundamentals and cash positions (VRTX, SEPR, BCHE, AMGN, INCY etc.) 2) Deep value approach (a la Rick Harmon) buy 2nd/3rd tier companies with sound science and development programs at deeply discounted levels. The second approach depends very much on sound knowledge and access to quality information.The risk is high and has to be alleviated by diversification. GZMO fits the second approach ,IMHO. Now,is GZMO's science so great? As far as SAGE is concerned, I believe it is, the cancer vaccine approach as well as the antiogenesis efforts are wildcards but at least they are sound approaches and we have to see where they go. So,its a sound speculation at a depressed valuation level with a chance for a quick bounce short term or a 5-10 bagger long term and a total loss as the downside (long term).

To: scott_jiminez who wrote (1397)	8/5/2000 1:12:35 PM
From: tuck	Read Replies (2) \| Respond to of 52153

Scott & Peter, This discussion makes me think we should start an "Emotional Biotech Valuation" thread (though I guess we have enough threads). As a start, I have an idea about the psychology behind Peter's observation WRT the stock price relationships between biotechs and pharmas: I think it's rotational. When investors in drugs are in frenzy mode -- as evidenced by the tendency for even bulletin board biotechs to go parabolic en masse -- we see the pharma and biotech prices moving in tandem, rising tide lifting all ships, blah, blah. When the frenzy ends, the stampede is to more conservative stocks. But the drug investor is still going to put money into an industry he/she knows. The market demographics are the same, for one. One evaluates clinical data from a pharma the same way as that from a biotech, for another. So to capitalize on their medical knowledge, these investors go for pharmas first and foremost. I would imagine this applies at the institutional level as well as the individual level. The trick is to find these inflection points, a la Peter's hindsight observation that the frenzy was ending when the biotechs failed to pop after secondaries. Anyone else have any such metrics to be backtested? Cheers, Tuck