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Biotech / Medical : BIOTECH & TECHNOLOGY INVESTING *UNDERVALUED*{T/A F/A & V} -- Ignore unavailable to you. Want to Upgrade?

To: CPAMarty who wrote (63)	2/8/1999 2:30:00 AM
From: tuck	Read Replies (1) \| Respond to of 423

Marty, Part of the reason is in your message: more diversified. Then there's stuff like balance sheet items, float, etc. Relative prices by themselves are not an important investment factor. Anyhow, I like ImClone, too, and bought a couple hundred shares in the low nines. I'm happy, and even happier with rash of insider buying at market values recently. Thanks to those Bloomberg equipped informants for sharing that info well before it is normally available to us cheapskates. It's one of the good things about these threads. To Jeffrey: Lone Wolf, I like your style! Some thread founders get ornery when challenged in the slightest, while you respond by being friendly and keeping the focus on the theme. That's a great way to run a thread; keep it up. And the theme is a great one. I look forward to gleaning a lot of timely and worthy information here. So I ought to give back some of my own. Two stocks I have followed for some time and like very much are Synthetech (NZYM) and Ligand Pharmaceuticals (LGND). In the gold rush, would you rather have backed some prospectors or the guys who were selling the picks and shovels to the prospectors? NZYM is a "picks and shovels" company, with a very sound business model that should be coming to fruition very soon. It makes peptide building blocks that biotechs use to manufacture their therapeutics, from the preclinical to the marketing stage. It doesn't have much competition and is actually making a little money. It is reasonably priced now because it just sunk some retained earnings into expansion. It has been rewarded with a couple of large contracts from companies that are just starting to market recently approved drugs. The price is also cheap because earnings, while always there, have been choppy. Contracts are subject to cancellation without penalty. This is a good way to do business long term. If a biotech's candidate doesn't make it through trials, it's better to let them drop it cleanly. The next candidate might go all the way, and NZYM wants to supply the peptides. So they are not going to piss anyone off needlessly. The business is maturing to the point at which earnings should now grow more steadily. Then the analysts will take notice. The company is tight lipped about contracts, probably because announcing them would indicate to their client's competitors where the clients are at in product development -- something clients might like to keep confidential. So this puppy is purely earnings driven, no news. I do not expect this stock to make any wild pops, but rather to appreciate steadily, even when the market in general is going south. They have a strong balance sheet with no debt or heinous converts or other creative financing. Thus I don't have a lot to say about it technically, except that it's been in a long basing pattern and will likely break out some time in the next couple of quarters in a rather relaxed fashion. Those wanting to time this can pester the IR dept. once per quarter with the following question: how many shifts are you running? They will answer this one. I remember 18 months ago they started running shifts around the clock, weekends and all; the stock almost tripled a couple of months later when the resulting earnings came out. Since then, it's given it all back. Like I say, they put some money into expansion, which always looks risky and impacts bottom line, and operating earnings have declined. I think they are now positioned for a similar, but more sustainable move, according to the above rationale. LGND is a prospector, but it's using a lot of picks and shovels. Big pipeline, excellent platform technology. They have two products just approved in small cancer markets. But they're just warming up. One of them is also in P-2s for breast cancer and is doing well. Granted the dosing is different for different indications, the fact that it's already approved should help. Not to mention off label usage (well I would, but how do you quantify it when it's just being launched?). Management consists of big pharma vets who aim to make this a big pharma company. Their financing was a little strange for a while; they had an off balance sheet R & D company and were mixed up in an arbitrage play that involved shorting. All that is gone now, and the company is bit easier for the average biotech investor to understand. All that's left are some debentures from a company they acquired years ago, and they don't have a material impact. The balance sheet is strong enough to support them until they turn profitable, which both management and analysts expect soon. Look for a small profit late this year, and then sharp earnings growth as the blockbusters roll out for indications with big markets. The company is around twelve now. There may be a little downside, perhaps to the high single digits. I'd expect some resistance around the high teens, and then who knows? Whew! That was exhausting. I'll give all of us a break for the moment, then post some links and details in the next few days, plus address any questions as best I can. For those who can't wait, both companies have webpages. LGND has a very active chat group here at SI, while NZYM's is pretty slow and less useful. Let's all do our best to emulate Lone Wolf, and good luck to all. Cheers, Tuck