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Biotech / Medical : Sepracor-Looks very promising -- Ignore unavailable to you. Want to Upgrade?

To: Ed Ajootian who wrote (987)	7/8/1998 9:43:00 PM
From: John Metcalf	Read Replies (1) \| Respond to of 10280

In regard to the convertible debt, I think it is foregone that the debt will be converted into shares, but not before the due date. If you held the debt, wouldn't you want to receive the interest as long as possible before converting, since the price is fixed and you gain by waiting? It makes sense to me to add 3.9mm shares to the outstanding in ones' calculations, assuming 36mm shares as a rough total, and $1.7B as a rough market cap. This puts Sepracor in the top ten biotechs, and at a reasonable valuation for a company with two approved products, with no revenue received yet for either of them. There is still huge upside, as the other products move forward and Levalbuterol and Allegra revs roll in. With regard to the TA, I don't think it works here. The stock moved on news, and will range-trade until there is more news, or until biotechs catch fire. One needs to recognize that some shares are held for investment, and some shares are traded. If I'd bought at $40 several weeks ago, I might have sold the Levalbuterol news. But I bought in the teens, and the taxes would eat up a sale from here. Stock is held by traders as well as investors, and some who range-trade around their long positions following the rising trend-line. A sell-off after a gain is to be expected, and doesn't matter at all in the long run.

To: Ed Ajootian who wrote (987)	7/8/1998 10:28:00 PM
From: BMcV	Read Replies (1) \| Respond to of 10280

Thanks for your explanation of why the convertible might tend to hold the price around the conversion level. I seem to recall something from you about convertible holders shorting the stock to lock in gains on their bonds, but that must have from the first issue when there were gains worth locking in. 12% dilution at these levels would explain a lot of the hesitation we're experiencing here. On the other hand, John's point that a price of 50, say, probably wouldn't bring supply into the market, since the bondholders wouldn't sell and lose their 7% (plus making themselves vulnerable to a price decline). And the dilution really is there for anyone paying less than $47.50 -- let's hope we've left that price in the dust when the issue comes due! Otherwise we'll have to actually pay them off in cash! Do convertibles trade differently above their conversion price? Does a different type of buyer come in then? Are the bonds tradable at all, or isn't this an offshore issue like the first? Above $47.50 are the bonds a better alternative for some buyers? A lot of questions, I know. I'm just trying to understand the dynamics of how the converts fit into the market price. It certainly is striking that the price has stopped dead for two days (and bumped this ceiling at the last top) right at the conversion price, so I think you're onto something. cheers

To: Ed Ajootian who wrote (987)	7/9/1998 1:57:00 PM
From: cav	Read Replies (2) \| Respond to of 10280

The convertible debt is no longer a factor as the dilutive effects of this have already been factored into the earnings models. anyone who does not feel this debt will be converted eventually should short the stock now. The talk on options also appears dubious, what is the open interest on these instruments? In my view you can also throw the charts out the window, the story is the drugs and as long as progress continues on that front shareholders will be richly rewarded. I want the stock to rise everyday also, but i am not concerned with short-term market noise but rather the underlying story behind the stock.