Risks In Biotech Stocks Akin To Oil/Gas, Analyst Tells Investors At Informed Investors Forum In Bethesda
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BETHESDA, Md.--(BUSINESS WIRE)--June 8, 1998--Investing in
biotechnology stocks has many characteristics analogous to investing
in oil and gas stocks, a noted biotech/pharmaceutical analyst told
attendees at the First Annual Informed Investors Beltway Biotech
Stocks Forum June 6 in Bethesda.
"The large pharmaceutical companies such as Merck (NYSE:MRK),
Bristol Myers Squibb (NYSE:BMY) and Pfizer (NYSE:PFE) are akin to the
large integrated oil companies," said Dr. Kris Jenner, a keynote
speaker at the Forum geared to individual investors. Jenner is a
biotech/pharmaceuticals analyst for T. Rowe Price Associates
(NASDAQ:TROW), the big Baltimore-based mutual fund family. "Investing
in biotech companies is a lot like investing in a specific oil field
... either you hit a gusher or drill a dry hole. And just like the oil
industry, some people have better luck hitting gushers. The same can
be said of biotech."
Jenner's talk concluded a highly-informative, all-morning Forum
highlighted by corporate presentations from executives at seven public
biotechnology companies. The executives gave thorough presentations,
and answered questions, about their science, products and prospects to
an audience that included individual investors, analysts, brokers and
media.
Executives in attendance were: Dr. John Holaday, Chairman/CEO and
Nelson Campbell, CFO, EntreMed (NASDAQ:ENMD); Dr. Michael Brennan,
President/CEO, Gene Logic (NASDAQ:GLGC); Stuart Essig, President/CEO,
Integra LifeSciences (NASDAQ:IARTD); Paul Herron, Vice President/CFO,
SunPharm (NASDAQ:SUNP); David Hilson, President/CEO, and Dr. Marc
Lanser, Chief Science Officer and founder, Boston Life Sciences
(NASDAQ:BLSI); Dr. Colin Goddard, President/COO, OSI Pharmaceuticals
(NASDAQ:OSIP); and Joe Medlin, Director of Investor Relations, CytRx
Corp. (NASDAQ:CYTR).
Opening the Forum, attendees heard a lucid, information-packed
presentation about the fast-evolving biotech wound care industry from
Dr. Alex Arrow, Vice President/Research at Wedbush Morgan Securities,
Los Angeles. Arrow reviewed recent developments in artificial skin and
the surgical glue products already on the market and in development.
Arrow's comments touched upon several companies, including
Organogenesis (AMEX:ORG), Advanced Tissue Sciences (NASDAQ:ATIS),
Johnson & Johnson (NYSE:JNJ), Chiron (NASDAQ:CHIR), Biospecifics
Technologies (NASDAQ:BSTC), Focal Corp. (NASDAQ:FCLO), Collagen
(NASDAQ:CGEN), Closure Medical Corp. (NASDAQ:CLSR), Protein Polymer
Technologies (NASDAQ:PPTI), Kensey Nash (NASDAQ:KNSY), and Perclose
(NASDAQ:PERC), LifeCore Biomedical (NASDAQ:LCBM), Ortel (NASDAQ:ORTL),
Tyco International (NYSE:TYC) and Thermogenesis. (NASDAQ:KOOL).
Audio tapes are available for $45 plus $3.95 S/H. The
five-cassette set includes all company presentations plus those of the
keynote speakers. Call Informed Investors at 800-992-4683 to order.
Access www.informedinvestors.com for more information about Informed
Investors.
Jenner's talk focused on the necessity for investors to put into
perspective biotech companies and the industry as a whole. His
extensive review of the industry gave investors a framework within
which to understand and analyze the nearly 300 publicly-traded biotech
companies.
Jenner gave insight into the importance of products, management,
market penetration, partnerships, distribution, financial resources,
R&D, market psychology, role of the FDA, clinical trials, and
competition in the valuation of biotech companies.
"Valuation of biotech stocks is excruciatingly difficult because
99% of biotech companies are losing money," Jenner told attendees.
"But every stock has a price and you have to develop a methodology
that enables you to compare Company A vs. Company B."
Jenner said market caps of biotech companies primarily reflect
whether -- and how soon -- a particular company can be profitable.
Currently profitable companies such as Amgen (NASDAQ:AMGN), Agouron
(NASDAQ:AGPH), Chiron, Genzyme (NASDAQ:GENZ) and others have market
caps above $1 billion. Approximately 25-to-40 other biotech companies,
including Inhale Therapeutics Corp. (NASDAQ:INHL) and Alkermes
(NASDAQ:ALKS) among the companies Jenner specifically mentioned, will
likely be profitable by 2001. Many others, mostly those with products
in early clinical trials, will not show profits until beyond the year
2001. Therefore, their stocks prices reflect that uncertainty and are
low.
"The farther along a product is in trials, generally the higher
the market cap. If you look at the best-performing stocks of recent
years, these have been companies with products having positive Phase
III data. Investors pay for visibility of products coming onto the
market or a company that is about to turn earnings-positive," Jenner
said. "That's because only about 20% of the products that enter Phase
I clinical trials eventually become a commercial product. About 80%
never make it."
While biotech stocks carry tremendous risk to investors, there
can be significant rewards for investors who take a long-term
approach, can weather extreme volatility and understand the sector.
Moreover, the timing is good, Jenner added, because in his analysis,
biotech stocks are in a two-year "mini bear market" and are
historically undervalued relative to large cap pharmaceutical
companies.
"In fact, Andy Grove of Intel (NASDAQ:INTC) recently made a
comment that if he had enough money as would be necessary, he'd buy
all the biotech industry and fire half the management," Jenner said.
"But with the positives come the negatives," Jenner said.
"Investors have to avoid what I call 'Hyope' -- which is hype and
hope. Investors have to assess what is a distant dream and what is
achievable."
Since 1993, Informed Investors has featured scores of quality
companies and industry experts at its Forums. Informed Investors
represents individual investors who collectively hold an estimated $2
billion in investable assets.
CONTACT: Informed Investors
Carol Short/Steve Chanecka/Sean Finnigan
916/448-8222 or 800/992-4683
KEYWORD: CALIFORNIA
INDUSTRY KEYWORD: BIOTECHNOLOGY PHARMACEUTICAL BANKING
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