Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Miljenko Zuanic who wrote (3275)	4/2/2001 12:54:57 AM
From: Spekulatius	Read Replies (2) \| Respond to of 52153

Miljenko, I do believe that your posts merits more thoughts. There are two recent developments, that will intensify the competition for biotechs: 1) Abundance of cash on hand for many biotechs (as you said) 2) Genomic discoveries & Tools and a flood of new drug targets While 1) has improved the power balance of biotechs versus drug companies in favor of the biotechs it also has intensified the competition among biotech peers. Also, the new genomic discoveries are expensive and complicated to exploit for smaller biotechs. I believe that these macrotrends will favor the bigger, cash rich biotechs : VRTX, MLNM, HGSI, ABGX, MEDX, PRCS which will streamline and industrialize their methods. I do think that the hurdle for newcomers to be successful will become higher and higher. Consolidation would be one way for the smaller biotechs to gain critical mass and to increase their chance of success. In the past, we have seen quite a few companies that were lucky and hit the jackpot - my guess is that we will see this less and less in the future.

To: Miljenko Zuanic who wrote (3275)	4/2/2001 7:36:47 AM
From: nigel bates	Respond to of 52153

IMW, the only way out is CONSOLIDATION. COMBINE, instead COMPITING. What is SYMPLE than this? If this fail in next two years, many today sector investors will come short. Because very few have ability to select winners, and even than they are +50% wrong. Prime candidates for adopting this approach are the cash rich genomics companies (eg INCY) who are talking about developing their own drugs. They would be far better served acquiring or merging with someone else. As MZ points out, there far too many disparate efforts as it is. It would be nice to create another two or three Millenniums (? Millennia) nig

To: Miljenko Zuanic who wrote (3275)	4/2/2001 10:06:25 AM
From: Mark Bong	Respond to of 52153

INDUSTRY CONSOLIDATION <IMW, the only way out is CONSOLIDATION. COMBINE, instead COMPITING. What is SYMPLE than this? If this fail in next two years, many today sector investors will come short. Because very few have ability to select winners, and even than they are +50% wrong.> MILJENKO, as a student of finance and economic history, I can assure you that there is significant historical precedent to your views. If you look back to the railroad industry, there were hundreds of RR companies when the industry started. Many went bankrupt and many merged into a few giants, often bought at pennies on the dollar either to eliminate competition or to expand market share. Same with steel where there were once over 400 companies. How many are there now? Look at autos. Before there were about 230 automobile manufacturing companies. How many are there now? GM alone merged about 7 firms together to compete with Ford. How many oil companies were there? There were hundreds until Rockefeller bought them all up by hook or by crook. How many drug companies have been merged together? How many computer companies have merged or gone out of business? Every major industry has gone into a consolidation phase, and biotechnology will also. You are also right. Some firms are weak, and they will go out of business or be bought up for pennies on the dollar. (Could this be the fate of Gila?) Some firms will merge? Since PRCS and HGSI have such a close relationship, will they merge if PRCS is successful at developing HGSI’s technology into successful drugs? Very possible, it may make sense for both of them, and they could afford to pay more for each other and still hold up their earnings than others who don't have agreements. Will MLNM or CRGN buy out the firms that they have huge market sharing agreements with? They will have better financials than Bayer or other big pharmas when the pipelines kick in. I can go on and on, but my point is made. At some point in the not too distant future, it will probably be seen as merge and become big and ‘efficient’ or be bought up as an also ran or just die on the vine. I guess that this means that we need to look at where firms where good science is combined with smart and super aggressive high growth at all cost business plans with firms that have plenty of cash and a strong stock price. Or on the other hand, maybe good science is not all that important. Look at Microsoft. They won the game by using aggressive business tactics, but they had one of the worst operating systems. In any event, a good portfolio of biotech firms bought cheaply that have good science and high growth products in the pipeline is a strategy that will not go wrong in the long run. Good luck.