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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Allen Furlan who wrote (14808)	7/12/2002 12:41:09 PM
From: sjemmeri	Read Replies (1) \| Respond to of 78628

A lot too summarize so I suggest you check out the very active ELN thread but here's how I see it. There are 3 major issues: 1) Sector got the stuffing knocked out of it (they are sort of half biotech/half pharma as they have several products on the market). This would probably account for half the drop even if nothing else happened. 2) Overhang of accounting issues and SEC investigation. They have a complicated structure with lots of joint ventures. For many of these, they invested in joint ventures then were paid for technology licenses. The good side of this is they have pieces of lots of potential drugs. I first became interested as they looked almost like a mini-mutual fund of small cap biotechs which I couldn't find anywhere else. They were investigated by SEC once before with a minor restatement as the result. 3) A chunk of outstanding debt due next year - wouldn't be an issue if they weren't already beaten down from #1 and #2. Other minor issues such as generic competition for 1 drug earlier than expected, a disappointment on a drug test, etc. I think they are worth 10x the current price without any sector/market recovery if they can get past the debt (which is really an issue of timing as the total amount is reasonable relative to sales and assets) and no major issue comes from the SEC (they are narrowing focus, selling non-core assets, etc.). There's plenty of risk but I think the reward potential is large. steve