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Biotech / Medical : Ligand (LGND) Breakout! -- Ignore unavailable to you. Want to Upgrade?

To: Andreas Helke who wrote (11377)	11/18/1997 4:55:00 PM
From: Andrew H	Read Replies (1) \| Respond to of 32384

>>Ligand never managed to get even to a cheap valuation and can only be called a steal at current prices. And the best biotech pipeline is included in the deal for free. I think I have to put Ligand back on my buy list despite of already owning a portfolio that is overweight in Ligand. Andreas << Andreas, of course all this is based on one method of valuing biotechs. I suspect that this method of valuation itself may have little value. It sounds suspiciously to me like Mike Murphy's method and his record in biotechs speaks for itself. Simply because a biotech spends a lot of money on R and D doesn't mean that they will ever get a drug through trials or earn a penny. It all depends who is spending the money, how they are spending it and on what. Throwing money at a problem is no guarantee one will solve it. I do agree that this method might be useful as one of many criteria for valuing a biotech, but by itself, I find it misleading at best.

To: Andreas Helke who wrote (11377)	11/18/1997 5:01:00 PM
From: Russian Bear	Read Replies (1) \| Respond to of 32384

Andreas, Thanks for the formula. If I am not mistaken, it is this precise calculation that Michael Murphy uses in his valuation of biotech companies. (I know that he is not highly respected by many on this thread; I have not been a follower of his recomendations, and thus have no opinion of him, one way or the other.) Here is one refinement that comes immediately to mind: Remeber to adjust for the 6.5 million outstanding warrants and the upcoming secondary offering. Thus, the number of shares outstanding, by my calculations, is approximately 39 million, not 29 million. However, we can safely deduct the cash on the ballance sheet ($50 million) and the present value of the $45 million that will be recieved upon exercize of the warrants, in June, 2000 (another $35 million.) 39m x 14 = 546m; 546m - 85m = 461m; 461m / 167m = 2.76 M-score. Thus, your conclusion remains opperative: LGND is a steal at current levels. For what it is worth, I have some problems with the M-score approach: (1) it ignores the (very necessary, in my view) qualitative assessment of a prospective company's pipeline and scientific underpinnings, and (2) it, likewise, ignores the size and attractiveness of a prospective biotech company's targeted markets. (However, fortunately, both these dimensions are net pluses for Ligand, in my estimation.) Even so, I agree that the M-score analysis makes for a good starting point for the valuation process. Good luck, RB P.S. I sympathize with you re: your predicament. I am recklessly overweight Ligand, myself. Let's hope we both get away with it! ;-)

To: Andreas Helke who wrote (11377)	11/18/1997 5:12:00 PM
From: shasta23	Respond to of 32384

HI ANDREAS! A friend send me this via e-mail today(i had never heard of this M formula today and now twice in one day), i guess he had his info from fidelity. AMLN has a M value of 1.7 CHIR, 3.8 INSV, 1.4 I have never heard of INSV...AMLN was i guess mentioned here before.I guess that a lot of biotechs are quite cheap with this formula. I don't have any info on GENZL, ISIP or GERN :-(( Stefan p.S. I only own LGND out of the above mentioned

To: Andreas Helke who wrote (11377)	11/18/1997 10:21:00 PM
From: Henry Niman	Read Replies (1) \| Respond to of 32384

Andreas, Thanks for the calculation. Many have criticize LGND's burn rate, but I've always thought its high burn rate was a plus. LGND has excellent management, and the quicker they spend the money, the more progress they make. I think that they are now calling their pipeline the best in the industry. I have felt that way for some time now. I expect LGND to be the "next AMGN", but I think that it will be harder for them because their huge success will require several blockbusters (in part because they have decided to share the risk and wealth with the big pharmas). However, they clearly are providing cutting edge technology for many major markets and sooner or later the street will figure out just how enabling their technology really is. Interstingly, the firm that seems to focus the most on LGND's underlying technology, H&Q, is the only brokerage firm not to give them their highest rating.