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Biotech / Medical : Zonagen (zona) - good buy? -- Ignore unavailable to you. Want to Upgrade?

To: Bill Wexler who wrote (1004)	12/16/1997 2:16:00 AM
From: Bruce Rosen	Read Replies (1) \| Respond to of 7041

The following was taken from another board: <<Let me begin by saying my long term belief in this company is unshaken. I have said before and it bears repeating, that given the accusations made against Zonagen, there would have to be an organized fraud going on for them to be true. There has been no proof of that at all. I can't say that I am enjoying this experience, but I can ride it out indefinitely, if necessary. I did not really think the share buyback would have a decisive effect. The one thing that will turn the tide is when the big institutions decide this is too good an opportunity to pass up. They have the buying power to defeat the shorts. These institutions - mutual funds, insurance companies, pension plans etc. - have sold a lot of falling winners since the Asia crisis began in October. The managers want to insure their bonuses by taking profits in a weak market and holding relatively risk free securities for the rest of the year. This money will be put back to work and Zonagen is a prime candidate for a true home run, especially at the present levels. With its heavy cash position, it is a low risk at these prices. Even Asensio valued Zona at $5 not including cash. Add the cash and you have an $11 downside. The upside is to pass its old highs and I think that entirely likely within the next six months. The company has made the decision to focus on filing the NDA as soon as possible. It is not imminent, but may be sooner than some expect. It is my understanding that they have the raw data from Pharmaco and are hard at work, building long term shareholder value as the stock falls in the short term. The buyback was an attempt to respond to the attack on its stock by putting its money where its mouth is. Zonagen never expected to raise as much as they did in their secondary. That fact and the $10 million upfront payment from S-P, with $47.5 million to follow makes the buyback an easy, pain free answer. If at some point, the company decides to do another secondary, IMHO, they will receive considerably more than they will pay now. If not, thats 500,000 less shares outstanding. The buyback is in no way a negative here; it is a time honored way for a company to rally support through tough times. How big a positive it will be remains to be seen. Obviously, it did not have its desired effect on Monday. I believe that what has happened to Vivus has been the true catalyst to this drop. In this difficult market for Techs and biotechs, some will say that if it can happen to Vivus, it can happen to Zona. There are some similarities to these companies, but there are major differences as well. The most incisive of the Vivus longs say that Vivus has not even begun its marketing plan, due in February, and it is already one of the most successful new drugs ever. Their 25% revenue shortfall is attributed by some as due to lack of demand, rather than production problems. They then conclude that the demand for the entire sector is overstated. We shall see. Given the demographics of our age, I would think that the market might be understated. Psychology will change and that view will at some point regain the initiative. When that happens, Zonagen will be there!! It is dreary business, putting up with the gloating of non-entities. But at their core, such posts signify nothing. Company management is confident, Schering is working behind the scenes to gain approval of a potential blockbuster drug and there has been virtually no insider selling. >> The only hypsters on this board are the shorts. This stock has handed shorts their heads before and will probably do so again. Remember, their risk is unlimited. If you notice, their level of due diligence consists of reading Asensio and looking at some charts. They are circling like vultures, but the easy money has, in all probability, already been made. The official company responses have been anything but shrill. They are too savvy to fall into the short trap by getting sidetracked. Make your decisions logically. Don't be swayed by transparent attempts to manipulate. Good luck to all longs!