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Biotech / Medical : Zonagen (zona) - good buy? -- Ignore unavailable to you. Want to Upgrade?

To: Alan Newman who wrote (6236)	2/25/1999 9:25:00 AM
From: Bob Trocchi	Read Replies (2) \| Respond to of 7041

Alan... Since the article is from "The Street.Com" which is a paid subscription, some people cannot get it. I seldom do this but since it is now "day old news" I have copied it here. I do not see anything in the article that is not already known by most of the people who post here. Does not sound like an endorsement to me however I am sure longs will find "snipperts" to cheer about. Bob T. Biotech Notebook: Impotence-Drug Stock Zonagen Suffers from Ups and Downs By Jesse Eisinger Senior Writer 2/24/99 3:09 PM ET Maybe there's something in the water, but Mexicans don't appear to need Zonagen's (ZONA:Nasdaq) impotence drug. Shares of Zonagen, the little company that developed a controversial erection pill called Vasomax, are about as volatile as Fred C. Dobbs in Treasure of the Sierra Madre. While the company and its supporters admit Vasomax isn't as potent as Pfizer's (PFE:NYSE) Viagra, they contend that it will find a nice niche and could be worth hundreds of millions of dollars. The shorts contend the drug's trial data are questionable and that it's little better than sugar pills. Recently, Zonagen's stock has perked up on news that partner Schering-Plough (SGP:NYSE) will manufacture Vasomax, not a big surprise since the big drug company will sell the pill, if it's approved. Zonagen, of the Woodlands, Texas, will get a 20% to 22% royalty on U.S. Vasomax sales. The stock has run up 50% so far this year. But in a potentially important indicator, the drug has failed to catch on south of the Rio Grande. Mexico is no major pharmaceutical market, of course. Yet, the underwhelming performance of the drug, sold in that country as Z-MAX, is highlighted by one stark, but overlooked, item in a recent earnings report: Zonagen actually gave money back to Schering-Plough in the fourth quarter. Satisfaction guaranteed or yer money back? The company paid $4,000 to Schering-Plough in the quarter. That compares with the $167,000 in royalties it earned in the year's first nine months. A Zonagen spokeswoman says that Schering had a Z-MAX promotional deal down Mexico way, in which it offered four pills for the price of one. In the fourth quarter, Schering-Plough "must have bought some back" from pharmacies, says the spokeswoman. Why? "I don't know." She says the payment indicates that "nothing else sold in the December quarter." Schering-Plough didn't return a call seeking comment. David Steinberg, a Volpe Brown Whelan analyst, isn't concerned. "What other drug stories have you followed where Mexico sales were a key to the story?" he asks. Approval in the U.S., the attending media coverage and initial sales will drive Zonagen's stock up, he says. Steinberg expects that Vasomax will be approved in the U.S. no later than the fourth quarter and will have $50 million to $100 million in first-quarter sales. That would be good, because everyone would forget about Mexico. Overall, how is the drug doing down south? Certainly not well, but the analysts aren't trying too hard to find out the specifics. In his Feb. 16 note, Steinberg, who rates the company a buy and whose firm has done underwriting for Zonagen, wrote: "Z-MAX in Mexico continues to hold its own, garnering approximately 25% to 30% of the [impotence] market." Talk to him and Steinberg says that information comes from the company. He also says, "I've heard anything from 10% to 30% share." That 10% number comes from prescription tracker IMS' international outfit. But Zonagen hints that that data are not comprehensive. Meanwhile, the impotence market in this country isn't too flush. Viagra's performance continues to stagnate, a trend over the past six months. It's selling at an annualized pace of about $480 million a year, far, far lower than the multibillion-dollar product it was supposed to be. That suggests the vaunted market for impotence isn't what was hoped, but Zonagen holders clearly think no es importante.