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.

Strategies & Market Trends : Take the Money and Run -- Ignore unavailable to you. Want to Upgrade?

To: Jorj X Mckie who wrote (3680)	6/18/2002 9:52:01 AM
From: Original Mad Dog	Respond to of 17639

I have yet to figure out why a biotech should have a dramatically different valuation than traditional pharm companies. Both are doing lots of research and paying lots of R&D expense to develop drugs that then have to go through a hugely expensive regulatory thicket. The few that manage to come out the other end may end up being a huge revenue windfall, if enough people have the problem the drug addresses and the insurance companies will pay for it. Biotech seems to me to be a slightly different method of developing the drugs, but the business model seems pretty much the same so far. And yet.....PE ratios....P/S ratios....all seem dramatically tilted in favor of biotechs: These are among those classified as "Biotechnology and Drugs" on the Yahoo! Stock Screener: AMGN PE 40 P/S 11 Serono S.A. (SRA) PE 36 P/S 23 Genentech (DNA) PE 85 P/S 8 Immunex (IMNX) PE 13.7 P/S 12 These are classified as "Major Drugs": Pfizer (PFE) PE 28 P/S 6 Glaxo (GSK) PE 26 P/S 3.8 Merck PE 17 P/S 2.49 Biotechs are being priced at a much higher P/S and somewhat higher PE on the hope that this different way of doing medical research will somehow produce big home runs. So far, that has not been the case, and there is little reason to believe it will be the case anytime soon IMO.

To: Jorj X Mckie who wrote (3680)	6/18/2002 10:08:30 AM
From: Dave Gore	Read Replies (2) \| Respond to of 17639

Jorj, Biotechs almost by definition, since they are heavy into R&D, rarely have good valuation. Don't forget, they are a different animal; you are buying promise of a blockbuster drug or drugs. They often do well in advance of drugs being released. We all remember how hot this sector was a couple years ago. It was not deserved but it was really in vogue for awhile and huge profits were made. IMNX was a biotech at $1+ and raced to $90 after its blockbuster drug Enbrel came out. AMGN is up 5,000%+ since its early days not that many years ago, etc. MLNM is one that has announced profit expectations and now has a healthy pipeline after it CORR Therapeutics acquisition. They were granted fast track status for thier cancer drugs by the FDC and have drugs in production now. MLNM raced prematurely from $5 to $90 the last couple years (prior to the CORR acquisition) and now is back to $13. Some, maybe not you, may want to keep an eye on it. It has been shorted heavily from much higher levels and the BTK is getting some positive press again.