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

To: Jacob Snyder who wrote (7397)	12/4/2002 10:44:45 AM
From: Sam Citron	Read Replies (1) \| Respond to of 52153

When Doctors Go to Class, Industry Often Foots the Bill WSJ, page 1 snip>>> Drug-company interest in CME has been building for years, but it has intensified since the industry adopted a voluntary code of sales conduct in July that emphasizes educating, rather than entertaining, physicians. The code bars currying doctors' favor with resort junkets, tickets to sports events or free tanks of gas -- all gambits used in the past. In response, manufacturers are stepping up their involvement in continuing education. online.wsj.com

To: Jacob Snyder who wrote (7397)	12/4/2002 11:19:14 AM
From: Biomaven	Read Replies (1) \| Respond to of 52153

Jacob, I've decided my ability to pick biotechs is nil, in spite of my physician's training and experience. There is just too much event risk, much more than in silicon-based tech; the fortunes of all these stocks rest on unknowable future events (not just unknown to me, but inherently unknowable no matter how much effort I spend in researching them). That's an interesting perspective that's worth discussing further. I think you have to distinguish between early stage biotechs and those with approved products. For example, let's consider a stock like Scios with its approved drug Natrecor. If you recall, their drug was initially turned down by the FDA despite a positive AC recommendation and they went ahead and did another large trial. Once those results came out it was pretty clear that the drug would be approved. At that point, or if you want to be somewhat more conservative, a little later after FDA approval, it becomes primarily a question of projecting peak sales and speed of ramp up. I would argue that this is much easier to project than anything in the silicon-based area - there is no issue of cyclical demand, no link to the rest of the economy, no issue of substantial pricing weakness or new competition or product life cycles for the next several years. Obviously there are still uncertainties - for example will home-based therapy instead of purely emergent treatment be significant or not, and of course the rest of the pipeline (like the p38 program) is still very much a lottery ticket. Other stocks I own with similar characteristics are KOSP and CEPH, although admittedly in both these cases there are patent uncertainties that make the stocks less predictable than SCIO. I bought some GILD near the open this morning after initial weakness from their announcement - they fall into a similar category as SCIO. I do agree that if you want to play in earlier-stage companies you definitely need a basket. Peter