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

To: keokalani'nui who wrote (7842)	2/7/2003 1:05:22 PM
From: Icebrg	Read Replies (1) \| Respond to of 52153

Wilder Good suggestions. Some of these things are no doubt implicitly used, when drug candidates and share prices are evaluated. The absolute value of the discount factors should also be able to give an insight into what kind of effect to the upside, that could be expected if the handicapping would prove to have been unfounded. (That happens after all from time to time - but unfortunately not often enough). >> 1. The nobody-really-has-an-answer discount applicable to anything in the IP portfolio other than COM, practically not quantifiable but contemplating worthlessness within the range.>> For Bayer - who still can't explain why aspirin does what it perhaps does. Or Alexion, who can't tell us why the infarct size doesn't really matter. >>2. The management pinnochio discount, not being totally truthful about clinical results or conversations with the FDA>> Very important. Even if management (for once) is truthful, companies with this type of bias might never be fully and rightfully valued. And if they against all odds should manage to get something through FDA's review process with a happy ending, the share price might still not increase, as everyone but the diehards will believe, that they have now started to fiddle with the books instead of the clinical protocols. Maxim - one of my personal favorites - comes so easily to my mind. I agree, this could be a very important factor to consider. >> 3. The big pharma clinical submarine discount; that is, you unexpectedly learn PFE just announced a 8000-pt expansion study using an existing 2x daily medication in your only indication which just commenced a 150-pt P2b, evaluating safety and efficacy, in an accute setting.>> You mean: "We thought, that there was enough power" index. Yes, large-sized trials are always very suspicious. Do you think that a 150/8000 discount factor would give enough protection in a case like the one you quoted? >> 4. Inexperienced executive clueless discount; not able to see or understand what little value the company's platform, drug or service will add. This is elsewhere known as the white heart but empty head discount, and may be the most dangerous one of all. >> This is actually a very interesting concept. Especially as the discount might turn into a premium to account for an over-experienced management team. I am thinking of my microcap a la jour - Spectrum Pharmaceutical. How to calculate? Easy (for once). Just add up the number of years in the service of the biotech industry for each executive and divide by the number of executives. A number of say 10, might give an index-factor of 1. A higher figure would be positive (unless a majority of the years have been spent in the company under consideration - then the index value should be reversed). As an aside I think that you forgot to mention the "flaming-out" index. I.e. the ratio between burn-rate (expressed as remaining years of cash and marketable securities less long-term debt) and the ETF factor (ETF = Estimated Time to FDA approval). Erik