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

To: IRWIN JAMES FRANKEL who wrote (3447)	4/18/2001 12:50:24 PM
From: Biomaven	Read Replies (2) \| Respond to of 52153

Jim, The timing and size of the cut was quite a surprise to me. I think it is the right thing to have done - all the risks in the economy are on the downside in my view. I'm somewhat concerned that the long bonds (initially at least)reacted negatively to the move. In general, interest rate moves have a complex relationship to biotech valuation. The fundamental value of a biotech is basically keyed off of the long term rate. (It always upset me when people compare historical PE ratios without factoring in the long bond yield). The earnings of many biotechs will actually decrease some as short term rates come down - remember many biotechs are cash rich and have earnings which are only weakly linked to the overall economy. Finally, cuts in short-term rates and greater liquidity almost always increase stock prices (as distinct from stock valuations). We're certainly seeing that today. Peter