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Biotech / Medical : VD's Model Portfolio & Discussion Thread -- Ignore unavailable to you. Want to Upgrade?

To: Vector1 who wrote (4612)	4/15/1998 8:48:00 AM
From: Biomaven	Read Replies (1) \| Respond to of 9719

V1, <<I have taken a look at the financing and frankly its not as bad as people have made out. First it must be converted within 3 years. Second, until December 20 of this year the conversion price is not less than $14.55 a share. GZTC is obviouly betting on a sucessfull phase III before the end of the year which will drive the stock price in excess of $14. >> I agree that this is not as bad as the "convert at 75% of the then price" financings, and that you do have protection until Dec 20. The issue is that any time after Dec 20, the holders have every incentive to deliberately drive down the price on 5 days of their choosing, so as to get good terms for their conversion, even if the price is then above $14.55. (Unless you take the view that this would be an illegal manipulation of the stock price). In other words, they would sell (short) say 1/3 of their holding at below the market price so as to get the same price for their entire conversion. The net effect is that the financing would be more dilutive than it appears to be. Peter

To: Vector1 who wrote (4612)	4/15/1998 3:24:00 PM
From: biowa	Read Replies (3) \| Respond to of 9719

V1, As regards the portfolio: I tend to agree with your evaluation of GZTC as a keeper at these prices, especially since everytime I hear of a potentially competitive transgenic technology they seem to either be collaborating with GZTC or in discussions. Not so certain on LGND. We've had a number of milestones pass that were supposed to push this puppy to the moon and we're still basically where we started. The question may not be what we think of the technology, but when the market will begin to realize the value. If it takes a year for the picture to start to clear might it not be better to put the money to work elsewhere and revisit this one later? Another heretical suggestion...CLTR. What do you see as the timeline on this story? Could this one fade a little before the next run-up and should we take some of the profit off the table now, invest elsewhere and then buy back in at a lower level in advance? Just a thought. biowa