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Biotech / Medical : Sugen (SUGN) -- Ignore unavailable to you. Want to Upgrade?

To: Miljenko Zuanic who wrote (135)	1/17/1998 6:04:00 PM
From: BulbaMan	Read Replies (2) \| Respond to of 550

I was at SUGN's H&Q presentation. It was well attended and one of the best I heard at the conference. Sure, it will be at least a couple of years wait until there are product revenues from SU101. And SUGN's stock will no doubt have its ups and downs in the interim. But, as a long-term play, I consider SUGN one of the most promising biotechs out there. I might add, that besides their technology, I like the fact that SUGN insiders have been buying the stock on the open market.

To: Miljenko Zuanic who wrote (135)	1/18/1998 6:41:00 PM
From: Kevin Ponzo	Read Replies (1) \| Respond to of 550

Hello Miljenko: Thank you for the points on Sugen in your January 16 note. I am also long Sugen despite certain risks inherent in investing in biotech companies. Below are some comments related to your points: 1. Brain Cancer: You mentioned there are approximately "13 PIII and 38 PII trials for brain cancer". I didn't know there were that many. Can you give me the names of the companies so I can follow their progress? And, re. Sales Projections: Projecting potential sales for a Phase III drug (i.e. SU101) is difficult. However, it is encouraging that even very conservative revenue estimates resulted in Lehman rating Sugen as a buy with a $29 price target. Note: The FDA Modernization Act of 1997 gives even early Phase II trials marketing significance. Once approved in one indication (for example, SU101 for brain cancer), companies may promote drugs in another, as yet unapproved, indication (for example, SU101 for ovarian or prostate cancer). 2. SU101 Market Launch: Re: "Based on Sugen's press releases, it appears that SU101 may not hit the market until early 2001". The company is being very conservative in what they say. Analysts covering the stock expect SU101 to be approved and introduced to the market in 1999. In fact, the Flk-1 program, which is currently in Phase I of human trials, is being fast tracked and should hit the market 6-9 months after SU101. Flk-1 is Sugen's largest potential market opportunity. 3. Corporate Partnerships: Unlike many biotechs, Sugen has not been forced to sell out to big drug companies in order to raise the cash needed for research and development. Collaborations often result in the large drug companies taking 70-80% of the profits in exchange for up front capital. The run-up in Sugen's stock price in 1997 allowed the company to make a secondary stock offering in order to get the needed cash. Thus, Sugen will retain the full value of its drug programs. A collaboration with a large drug company would certainly provide a short term catalyst for the stock (by confirming drug value), but no collaboration is actually far more bullish in the long run. 4. Flk-1 Data: Caution is always understandable in biotech. But with market capitalization of 2x cash on hand, a Phase III drug where one half of patients (virtually dead people) have shown benefit, and an expanding pipeline of compounds behind it, the share price is ridiculously low!! 5. News Reporting: One of the unique qualities of this company is that it doesn't over-hype itself while insiders sell. They just keep doing what they always have said they would -- build a cancer business on science that works. Why else would Carter, Hirth and Langecker be there? 6. Cash Position: Sugen's current cash position will be sufficient to fund its operations to the year 2000. Assuming sales revenue starts in 1999, Sugen may not need a partner at all. However, Sugen's strategy does allow for offsetting development costs by taking on oncology partners outside North America. Further, they may negotiate for North American partners in areas outside cancer, such as diabetes. With more cash in the bank than ever before, Sugen can negotiate from a position of strength, which is a good place to be. 7. Shortage of Diversified Compounds: I would have to disagree that this is a problem for Sugen. With their ability to do high throughput screening and combinatorial chemistry, they can literally test thousands of compounds over a short period of time using their in house massively parallel computer system. In conclusion, this story has gotten even better as the share price has fallen from the high. When the stock broke out of its base in September, the fundamental reason was a great Phase II (based on that the stock went to $21). Since then, the company has $30 million more in the bank, their lead compound is in the pivotal trial, and a new compound for breast cancer (among others)!! With word of any success in Phase III, the marketplace will begin to place value on the entire basket of compounds and those institutions that fail to acquire shares today will have an impossible time building a position on the way up!!