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

To: LWolf who wrote (17)	6/6/1998 11:15:00 AM
From: LWolf	Read Replies (1) \| Respond to of 124

From 6/15 BW (see "radar screen" below) ----------------------- BIOTECH STOCKS: WARNING: MAY CAUSE DIZZINESS The key to biotech investing is knowing when to get in and out Next to Hollywood, biotech is the industry most apt to confuse fantasy with reality. But in the past year, reality has held sway: Biotech stocks are down 2%, while the Standard & Poor's 500-stock index is up almost 30%. So how does one find value in a sector that's risky and--for now--underperforming? One useful approach is to study where a drug is in the development cycle. Many investors like to get in on the ground floor, when a drug is still in trials. But they must tread carefully: Once a drug gets Food & Drug Administration approval, the stock usually declines instead of running up. On May 26, for instance, Organogenesis Inc. (ORG) got clearance for its Apligraf, a human-skin substitute. The stock, which hit 37 in April, is now at 24 11/16. Organogenesis is not alone. This is a pattern in biotech, says Matthew M. Geller, an analyst at CIBC Oppenheimer Corp. in New York: ''Investors start to sell because they're nervous that drug sales won't meet projections.'' GYRATIONS. A company that has faced the same prospect is Protein Design Labs Inc.(PDLI), which recently received approval for a kidney-transplant drug that prevents rejection of the new kidney. The drug can also be used to treat psoriasis and juvenile diabetes. Dick Bank, portfolio manager at First Tier Partners, a hedge fund in Los Angeles, says that, despite its large potential, the stock is down 50% from its high of 51 1/2 in November. But Bank thinks the company, with its pipeline of upcoming drugs, will hit 45 by yearend. Another stock that got hit after FDA-panel approval for its new treatment for Crohn's disease is Centocor (CNTO), a $2.5 billion-market-cap company. The stock fell about 15%, to 36, last week after the news. But Arnold Snider of Deerfield Management in New York thinks Avakine will make a lot of money in the next few years. He believes the stock could hit 50 in 12 months. If you have an aversion to gyrations, you'll be more comfortable playing in the early or late part of the development cycle. Mark Lambert of Biotechnology Value Fund in San Francisco looks for companies still undiscovered by Wall Street that have enough cash to last a long while. Says Lambert: ''We like to find companies in their early stages, with low liquidity, low market cap, and not necessarily good news flow. Currently, the best opportunities I've ever seen in biotech are below the $200 million-market-cap level.'' Lambert likes NPS Pharmaceuticals Inc. (NPSP). Its most valuable asset, he says, is a partnership with Amgen Inc. (AMGN), the industry's largest player. NPS is developing a drug for treating hyperparathyroidism, which afflicts women after menopause. The drug can also be used in renal dialysis. At 7 3/4, NPS stock is trading near its 52-week low. He thinks it could more than double in the next year. ''RADAR SCREEN.'' Another early-stage company is Synaptic (SNAP) , a leader in pursuing drugs for obesity, depression, and migraine headaches, using a new technology that helps bind molecules together. ''It's off everyone's radar screen because the drugs are still in early-stage development. The company is still small, with a market cap of $155 million,'' says Bank. The stock is at 14 7/8, but Bank thinks it will reach 28 by yearend. Late-stage investing can also be fruitful. ''What we typically look for is how to eliminate some of the risk,'' says Bank. That means he seeks companies that are in advanced clinical trials, have marketing agreements with big companies such as Merck & Co. (MRK) or Pfizer Inc. (PFE), and have multiple products in development. He also wants to make sure the clinical benefit of a drug is so great that managed-care providers have no choice but to reimburse patients who use it. In short: Take your pick on which stage of the development cycle to play. And remember to distinguish fantasy from reality. By Debra Sparks in New York