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Biotech / Medical : Ligand (LGND) Breakout! -- Ignore unavailable to you. Want to Upgrade?

To: Proton who wrote (23074)	7/11/1998 12:41:00 PM
From: Proton	Respond to of 32384

Re: Discouraging Report for LGND Buffetologists [Long, but On Topic] We have been repeatedly reminded that patience will reward long-term holders of LGND. I asked myself (and Henry, earlier this week) if there were any point at which LGND would have been a good investment, relative to the S&P 500. On a monthly basis, since the end of 1994, the answer is "NO." In the table below, the "Hope Index" shows the performance difference between LGND and the SPX (from the date in each row to the 10 July close). Choosing LGND over the SPX on any of the dates listed would have been the wrong tactic. It was close to the right decision at two times: April-May, 1995 and the spike low of January, 1998. It would have required remarkable timing to have bought at either of these times, and, of course, "Timing biotechs is difficult." I simplified this analysis by using month-end prices. I suppose that, if one looks at weekly or daily data, one may see a few days on which the LGND trade actually outperformed. However, such timing considerations ought not matter to long-term investors. Right? Pý Month-End SPX LGND Hope Date Close Close Index 12/30/94 459.27 8 1/4 -102% 1/31/95 470.42 7 1/2 -81% 2/28/95 487.39 6 7/8 -57% 3/31/95 500.71 6 3/4 -47% 4/28/95 514.71 5 3/4 -9% 5/31/95 533.40 5 7/8 -6% 6/30/95 544.75 8 1/4 -62% 7/31/95 562.06 9 1/8 -70% 8/31/95 561.88 9 1/4 -72% 9/29/95 584.41 9 7/8 -73% 10/31/95 581.50 7 7/8 -41% 11/30/95 605.37 8 1/2 -45% 12/29/95 615.93 10 3/4 -73% 1/31/96 636.02 13 1/4 -89% 2/29/96 640.43 12 1/8 -79% 3/29/96 645.50 11 5/8 -73% 4/30/96 654.17 14 5/8 -93% 5/31/96 669.12 16 3/4 -99% 6/28/96 670.63 16 5/8 -98% 7/31/96 639.95 12 1/4 -80% 8/30/96 651.99 12 3/16 -76% 9/30/96 687.31 13 5/8 -78% 10/31/96 705.27 12 3/8 -64% 11/29/96 757.02 12 1/16 -50% 12/31/96 740.74 14 7/8 -73% 1/31/97 786.16 13 7/8 -58% 2/28/97 790.82 12 1/8 -44% 3/31/97 757.12 11 1/8 -41% 4/30/97 801.34 10 1/4 -23% 5/30/97 848.28 11 7/8 -32% 6/30/97 885.14 12 7/8 -34% 7/31/97 954.29 12 3/4 -24% 8/29/97 899.47 14 1/2 -43% 9/30/97 947.28 16 1/2 -47% 10/31/97 914.62 14 5/8 -42% 11/28/97 955.40 12 3/4 -24% 12/31/97 970.43 12 7/8 -23% 1/30/98 980.28 11 -5% 2/27/98 1,049.34 15 -28% 3/31/98 1,101.75 15 15/16 -27% 4/30/98 1,111.75 14 1/2 -19% 5/29/98 1,090.82 13 15/16 -17% 6/30/98 1,133.84 12 7/8 -6%

To: Proton who wrote (23074)	7/11/1998 5:43:00 PM
From: WTDEC	Read Replies (2) \| Respond to of 32384

P2, I like your work, it illustrates how deeply undervalued LGND is relative to the SPX. If you compare LGND to an Internet stock index, or RedHerring's Technology stock index, the disparity multiplies. While comparison to the SPX is useful for some purposes, there are those, myself included, who compare LGND's performance to the small and mid-cap biotechs. We have made the decision to invest within this universe of companies and wish to measure the performance of our 'picks' against the alternatives available within the universe. I have not made such a precise comparison for the periods which you have used, but the work I have done leads me to say LGND has not done badly compared to the typical small/mid-cap biotech. I think comparing the biotech universe to the SPX is a fair way to evaluate the decision to invest in the sector (the Russell 3000 is a much better representation of the overall US market). That would show results along the lines your analysis shows for LGND alone: being in the small/mid-sized biotech sector during most of the period has been a poor choice. Again, selecting LGND rather than other biotechs within the universe has not been such a bad choice. There are other decisions imbedded in all of this, that being the choices to be invested in stocks in general and in US stocks as represented by the S&P 500 rather than a broader US index such as the R 3000. But, I think you understand all that so I'll end by noting that a decline in the SPX relative to LGND will accomplish the same thing as LGND rising relative to the SPX. In reality, some of both are likely. In the meantime, it is hard to argue against the fact that the biotech sector has been very disappointing and may be grossly undervalued. I think you will find that except for a few large biotechs (which I excluded because they are no longer in the 'development' company category thus presenting a lower risk profile than LGND's peer group), LGND's performance has been roughly typical of it's peers. On the other hand, I think LGND's business development has been superior to most others within it's fair comparison (peer) group and further supports the undervalued case. Best regards, Walter