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Biotech / Medical : T/FIF, a New Plateau -- Ignore unavailable to you. Want to Upgrade?

To: scaram(o)uche who wrote (287)	10/27/2000 10:07:17 AM
From: PuddleGlum	Respond to of 2243

Do I think they're bargains? Can't honestly say that I do. In the biotech sector I haven't had much success finding bargains. I just try to find good technology, and for that I rely a good deal on you and Peter and V1. pg

To: scaram(o)uche who wrote (287)	10/28/2000 6:45:36 PM
From: scaram(o)uche	Read Replies (1) \| Respond to of 2243

I like to compare this type of company to INCY. Price to "sales" is 12 at INCY. That's a factor of 20, for twice the market cap. Interesting, PG.... exactly the same point was made in this new (to me, at least) email newsletter, The Bull Market Biotech Investor (http://www.BullMarket.com))....... 2. RELATIVE VALUES OF THE CHIP ARRAY PROVIDERS Affymetrix’s management and employees must have hunkered down in the third quarter to bring the company to a break-even point with respect to earnings. Following the earnings announcement, the stock price gained 32% on 8 million shares: over five times the average daily volume. The interesting aspect is that up until 2Q00 earnings were announced, Affymetrix had been considered a blue chip of the Biotech sector and the stock was performing well. However, at the announcement of 2Q00 earnings, the company posted a greater-than-expected loss and the stock price declined by as much as 50%. It has been a difficult ride for shareholders because many of the sector’s blue chip stocks have advanced by 50% or more this year. With the positive earnings report and Wednesday’s gain in share price, it is worthwhile to examine some of the valuations among the providers of chip arrays and to see how Affymetrix stacks up. The chart below shows the last trading price (Close), market cap (Cap), price-to-sales ratio (Pr/Sa) and cash, cash equivalents and marketable securities (Cash) for each security. For the Pr/Sa calculation, the sales are projected for this year and are not trailing twelve-month sales. The table should be viewed with the courier font. Close Cap Pr/Sa Cash Affymetrix AFFX $68 $3800M 19 $430M Incyte Genomics INCY 36 2300 12 640 Sequenom SQNM 35 850 106 151 Illumina ILMN 36 830 410 122 Gene Logic GLGC 22 550 20 242 Hyseq HYSQ 30 390 28 260 Nanogen NGEN 16 320 36 100 The above table lists the companies according to market cap; however, the point is to understand how the market cap relates to annual sales (Pr/Sa). The market cap, derived from the number of outstanding shares multiplied by the share price, is the value that investors have put on the stock. The lower the market cap, in comparison to annual sales, the lower the price-to-sales ratio and the better the value. Remember though, this is only one simple means to find relative values among these stocks, and this does not take varying profit margins into account. In the above table, the stocks with the lowest price-to-sales ratio are Affymetrix and Incyte Genomics; these companies provide the best value according to this simple example. They also happen to possess the most cash and have significant annual sales. In fact, Incyte Genomics is quite undervalued in comparison to shares of Affymetrix. If investors continue to push up Affymetrix’s price, it will be interesting to see whether or not Incyte’s shares also increase. The stocks with the highest price-to-sales ratio are Illumina and Sequenom. Both of these companies are rather newly established and so it is understandable that their price-to-sales ratios are high because annual sales are quite low. In tough market conditions, it is more likely to see stocks with high price-to-sales ratios fall in price, while stocks with lower price-to-sales ratios tend to fare better. It was in Thursday's edition. I like their commentary as a general rule. It's the first letter of this sort that I've actually subscribed to (pointer from Stefaan).