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Biotech / Medical : Munch-a-Biotech Today -- Ignore unavailable to you. Want to Upgrade?

To: Steve Lokness who wrote (145)	2/12/1999 8:50:00 PM
From: Biomaven	Read Replies (1) \| Respond to of 3158

Steve, It is important to remember that much of the AGPH premium occurred before the deal was announced. The rise up from the teens last summer to the 50's before the announcement was fueled in part because of the strong sense that AGPH was in play. AGPH was sort of unusual because it had one strong product to which the street didn't want to give a decent multiple, combined with a pipeline that was perceived as dubious. Right now, I don't think you'd need more than a 30% premium or so to take out most biotechs. We've never seen a hostile biotech offer before, and one would probably be pretty unlikely. So management's views are still significant. I should emphasize (and should have done so before on this thread), that trying to get lucky by picking the one or two companies that may get bought out isn't a realistic investment strategy. (It's a kind of fun game, though.) Rather, a takeover is an independent signal of valuation in an industry where those are hard to come by, and my hope is that one or two munches might be enough to bring institutions and other players that have heretofor been skeptical of biotech valuations into the sector. If this happens, the play is then the stocks that are most like the ones that got munched. That's why I think the AGPH takeover was very significant for the sector, even though there was not much perceived premium. It also made the "professionals" who were shorting it all the way up from the 20's look very silly. It's one thing for your short to fail because of hype, speculation or because the company got lucky; it's quite another for it to fail because a very large and savvy company pays a bundle for your "overvalued" target. Peter