>>the shopping list . . .in the way of larger cap biotech<<
Mike, I don't have anything to add to your list. I have SEPR, CHIR and MTC on my contest list and like them (and GENZ and INCY) in varying degrees, but don't really know enough about BGEN, AMGN, IMNX, MEDI, etc.
I would underscore that SEPR seems to me, by a wide margin, the best idea of the bunch, with easily the best risk-reward ratio. (I come to biotech with some of the instincts of a value investor, by which I mean that I think first, or at least a whole lot, about the downside while I'm looking in detail at the upside potential.) SEPR is far and away my biggest med/biotech holding, i.e., several times larger than the stocks in second and third place (some of that is SEPR's fault, since it has gone from about 40 at June 30 to about 104 today, and my average cost is in the low 40's).
The "best risk-reward ratio" -- not because it has the largest potential reward (I have small positions in a bunch of things like BTRN, ISIP, TTP, etc. which have more spectacular upside potential, but have fearsome risks associated with them, and could go to zero or close to it), but because SEPR has awfully little risk to balance against the very nice potential reward.
As to SEPR's risks, I put it this way in my post #23 on this thread
( Message 7048432 ):
" . . . These deals may well bring SEPR royalties or co-promotion profits on five or six billion-plus dollar drugs by 2003 or so, with another handful in the years after that.
"I like the high potential reward, but I like it even more that SEPR's ICE strategy carries much less risk than most drug-development work. (1) Because SEPR is improving drugs that are already scientifically well-understood and FDA-approved, the risks of bad results in clinical trials and of FDA rejection are much smaller than for wholly new drugs. (2) The cost of FDA clinical trials (extremely expensive for new drugs) is much smaller, because much of the clinical data required by the FDA was amassed (a) when the parent drug was reviewed and approved by FDA, and (b) during its post-approval use in large numbers of patients; accordingly, less money is risked on each potential new drug. (3) Clinical trials take much less time, also because of the previously-compiled clinical data; the successful improved drugs thus reach market much more quickly than wholly new drugs. In addition, risk is reduced because SEPR has a broadly diversified collection of ICE's, so that the failure of a couple or many of them will not hurt SEPR much, and it has a dozen or more chances at blockbusters."
In addition, SEPR's risks are further lowered by the fact that it has $525 million in cash on its balance sheet, more than enough to get it through to profitability in late 2000 or in 2001, and has its partners on various deals spending several hundred million on developing its partnered drug candidates.
As for reward in that ratio, IMO the torrent of cash that will flow into SEPR starting in 2001 and vastly increasing in 2002 and 2003, under just the existing licensing or co-promotion deals, (plus Xopenex (levalbuterol), which is unpartnered and on the verge of FDA approval.), may well yield earnings of $15 or $20 or more per share. (This counts nothing for the possible revenues from the twenty or more other ICE's that SEPR has isolated and patented, including one for obesity drug Meridia, see Message 7393616 ). If one puts a modest PE multiple of say 25 on these, you get . . .well, do your own arithmetic and your own gasping . But what I like the most about SEPR is that, if I'm wrong on these estimates, I won't be hugely wrong, because a substantial part of this anticipated cash will come in (from 2 or 3 or 4 of the blockbuster drugs, rather than 5 or 6), and instead of going up 8 or 10 or 15 times from here, maybe SEPR only triples or quadruples in the next five years. That's a proposition -- a risk-reward ratio -- I can like.
Again, disclaimer, disclaimer. I may be wrong on most of this, and no one should risk a real dollar on SEPR without doing his or her own due diligence.
--RCM |
