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

To: Icebrg who wrote (10921)	3/12/2004 3:37:47 AM
From: Icebrg	Read Replies (1) \| Respond to of 52153

What the Doctor Ordered Thursday March 11, 6:04 pm ET By Andrew T. Gillies Kris Jenner puts his emergency room training to work picking drug and medical stocks for the T. Rowe Price Health Sciences Fund. Flip through regulatory filings for Onyx Pharmaceuticals and you'll learn that it develops "innovative therapies targeting the molecular mechanisms that cause cancer." The tiny Richmond, Calif. biotech hasn't made a dime selling drugs, and red ink is all that lies immediately in the forecast for its bottom line. Still, its proposed drug to treat kidney, liver and other cancers--by blocking certain biochemical signals controlling tumor cell division and the formation of related blood vessels--looks promising. In the past year Onyx shares have rocketed from $7 to a 52-week high of $38. Finding moon shots like Onyx (NasdaqNM:ONXX - News), which he started buying when it traded in the teens, occupies a good chunk of Kris Jenner's time. Jenner is manager of the $1.2 billion T. Rowe Price Health Sciences Fund. His qualifications: a summa cum laude bachelor's degree in chemistry from the University of Illinois, a doctorate in molecular biology from Oxford University and a medical degree from Johns Hopkins. He also completed four years of a surgical residency at Hopkins, where he learned how to keep cool under pressure. "Nothing generates as much emotion as pulsating blood," he says, recalling the gunshot and stab wounds that found their way into the Baltimore emergency room where he trained. Jenner, 42, says that his background gives him a much better chance of success than most investors at prospecting for medical outfits, particularly speculative ones whose fate rides on one innovative product. "The complexity or nuances of that evaluation are quite significant," he says. His investment fever chart bolsters his case. He took over the Health Sciences Fund in January 2000, after a few years as a biotech analyst. For the four years since, it shows a total return of 2.8% annualized, six percentage points higher than the S&P 500. Jenner says he rarely uses stock screens to find investment ideas; most of the smaller outfits he goes for are off the charts in terms of traditional measures of value. Even Genentech (NYSE:DNA - News), a biotech "blue chip" with earnings, sells for a wild 47 times its cash flow (in the sense of net income plus depreciation). Instead, Jenner bases his decisions on an assessment of the company's science, the quality of its management and the commercial prospects for its treatments, as well as its valuation. Neurocrine Biosciences (NasdaqNM:NBIX - News) fits Jenner's bill. The San Diego firm, which specializes in treatments for diseases affecting the neurologic and endocrine systems, has marketing and research relationships with industry heavyweights Pfizer, GlaxoSmithKline and Wyeth. Jenner expects the Food & Drug Administration to give the nod to indiplon, Neurocrine's insomnia pill and most promising drug, by the middle of next year. If that happens, he predicts sales of indiplon will eventually be more than $1 billion a year worldwide, with around a quarter of that revenue going to Neurocrine. The company's calendar 2003 sales were only $138 million, on which it lost $30 million. A much longer shot at Neurocrine: research on preventing the immune reaction that destroys the pancreas' insulin-producing cells and causes type 1 diabetes. Not all of Jenner's picks are little biotech outfits. One of his fund's largest holdings--and one of Jenner's current favorites--is Anthem (NYSE:ATH - News), a $16.8 billion (2003 sales) Indianapolis-based health benefits manager, which last October announced a merger with WellPoint Health Networks (NYSE:WLP - News) that would make the combined company the number one health insurer. Jenner expects Anthem to turn in annualized earnings growth of 15% over the next few years. "You have a very unusual combination here of below-average valuation and above-average growth," he says. The stock sells for 14 times estimated earnings for the next 12 months, compared with 16 times estimated earnings for the present industry leader, UnitedHealth Group. Take Your Meds Dr. Jenner usually cares more about a portfolio prospect's science than he does about its P/E ratio. Company Recent price Change from 52-wk low EPS projected growth* Prognosis Anthem 86.31 50% 15% Thumbs up on merger with WellPoint; stock looks cheap. Invitrogen 73.65 163 18 Dominant market share in products for molecular biology research. MGI Pharma 51.65 471 32 Doing "outstanding" job launching chemotherapy nausea drug. Neurocrine Biosciences 57.76 47 37 If insomnia pill indiplon is approved and a hit, stock could triple. Onyx Pharmaceuticals 38.08 464 10 "We still think there's plenty of upside in that stock." Prices as of Mar. 2. 1Annualized, projected over next three to five years. Sources: FT Interactive Data and Thomson First Call via FactSet Research Systems.

To: Icebrg who wrote (10921)	3/12/2004 4:22:28 AM
From: bio_kruncher	Respond to of 52153

Medpundit I would disregards Smith's criticism of the statistical methods. The methods used in the study are both standard and appropriate. Using 'actual event rates' as proposed would be inappropriate as they would not adjust for the actual time at risk for each patient as the "statistical mill" appropriately does. I also think that most patients,physician,insurance companies,.... would think that preventing 4 major bad events per 100 people over 2 years is a very good and important thing. His comments on adverse effects are fair enough. bk