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

To: Londo who wrote (2358)	12/21/2000 11:32:26 AM
From: scaram(o)uche	Read Replies (2) \| Respond to of 52153

Londo: Your post re. MCDE had some very valid points. It also contains some statements that appear to be founded in little familiarity with the sector. I'd like to begin to discuss your post, so that we can try to estimate a "takeout" value for MCDE. Huffman clearly has one of biotech's toughest jobs, timing-wise. You hit on the key criticism for owning this stock. They need money. They will either need to do a highly dilutive deal or find some innovative bridge. The in vitro essential gene program at the company was a disaster. They learned such, and have adopted a targeted approach. >> they don't have any products, and just a ton of anti microbial research. << We spend a ton of time trying to value research. You can't just dismiss it as being without value. Would you agree with that statement? >> MCDE doesn't have enough cash to warrant a higher valuation. << Would you assign any value to their share of Iconix? Would you agree that the self-funded programs at MCDE that should be evaluated in any valuation model? If so, what do you think such programs are worth, given the established drug discovery infrastructure? Do you believe that there is value in the animal health program that is funded by Pfizer? The cephalosporin with JNJ.... there is a toxicity issue with the first molecule (none observed in clinical trials that I know of, however!). There are also issues with formulation (solubility) of the sucker. If JNJ returns the program to MCDE, is there value there? There is a backup molecule with reduced toxicity and unlimited solubility at physiological pH. It has reduced activity against enterococcus, however. Is there value in the backup molecule? Do you assign any value to the Daichi collaboration and the EPI program? >> MCDE doesn't have enough cash to warrant a higher valuation. << Is this true, or has the market -- in the midst of tax selling -- discounted the value to an irrational degree? If you were a pharma executive, what would you pay for MCDE in cash? If you were the CEO at CBST, what price would you consider paying in shares? TIA for any thoughtful answers. You will help all of us with strategy, going forward. Rick

To: Londo who wrote (2358)	12/21/2000 12:31:35 PM
From: scaram(o)uche	Read Replies (1) \| Respond to of 52153

Londo: Want to make a few more comments, to further frame my questions..... MCDE is clearly not a stock that would soar, without considerable good news, in any sector recovery. IMO, your criticisms are very, very valid. I want to make sure that you see that I agree with your commentary as it related to MCDE as a functioning, independent entity. Some biotech investors focus on fundamental value rather than "story". It hurts sometimes. Like right now. Sometimes, if you pick the wrong stock, the hurt never goes away. To give you further perspective..... I purchased shares, pre-ICAAC at about $8/share. When it went to $15, I considered it to be significantly overvalued, given the potential for bad news from JNJ, and sold. It is, unfortunately, a stock to trade these days. The question..... was I making a mistake at $8, or was I wise? I don't have a ton of bias here, and I have a relatively small position. I do, however, have an interest in your answers. They will help me (and others?) to formulate a strategy here. Thanks. Rick

To: Londo who wrote (2358)	12/21/2000 2:15:12 PM
From: tuck	Read Replies (1) \| Respond to of 52153

Londo, MCDE will be getting slightly reduced funding from the various agreements, and the burn rate will increase slightly, IMO. But as Rick points out, the R&D -- not just the results, but the infrastrucure/bodies -- have some value above zero. They would make a good fit for several companies and would be a good bargain even with a hefty premium from today's $4. Figuring they have roughly one year's worth of cash. The time to do a deal would be in the spring, in the sweet spot of seasonality, and before their balance sheet looks desperate. Hopefully riding promising news of entering clinic with a compound or two and related small milestones. Then I'm expecting it to be in the high single digits. Then I'm out or half out. That's my plan. Biotechs that missed the bubble this spring to finance are munch candidates for the ones who did not. CEGE is indeed in the latter position. Pretty confident building a factory with nothing in PIII. Any customers besides themselves? VLTS PEGging technology gets wins, but I wonder about further patent battles in that space. But small caps at lows with good science & solid IP look like bargains relative to the bigger caps that have resisted lows and will likely recover first. But not as well, IMO. Hence I'm buying the small caps and trying to be patient for a few months with those. Cheers, Tuck