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Biotech / Medical : Biotech Valuation -- Ignore unavailable to you. Want to Upgrade?

To: LLCF who wrote (93)	3/23/1999 12:13:00 AM
From: John Metcalf	Read Replies (1) \| Respond to of 52153

How about looking at crater stocks from the ground up, in consideration of the view that the selloff represented a value that was not supported in the market. PGNS has about $3 per share in cash ($50mm), and an approved product that sold $60mm in '98 and will do so again in '99. It received a foreign approval in February. At $12 per share (16.3mm outstanding, 17.4mm diluted), the company is selling for cash plus 2.5 times sales. They have revenues and cash to go further. SNAP is selling at a 10% premium to book value. Though cash burn will escalate, they have money to advance programs. Downside should be protected by cash and equivalents of $5 - $5.50 per share.

To: LLCF who wrote (93)	3/23/1999 9:43:00 AM
From: Biomaven	Read Replies (1) \| Respond to of 52153

David, Historically, biotechs have not done well after they have cratered. Most examples have been of Phase III trials that didn't make it, though, where the company attempted to soldier on looking for a subset where the drug works. PGNS clearly now has a severe credibility problem - both in its management and (perhaps more important) in the size of its market, where it looks very much as if the bears were correct. My guess is that it will eventually end up being acquired, given that it is going to be cheap for a while. SNAP looks like it was just unlucky. They've got a good amount of cash, but their current partnerships are expiring, and so my guess is that they will have to cut back some. I guess there is a chance that Lilly will munch them while they are depressed, although eating your partners isn't considered polite. Bottom line is I really don't know what's going to happen to these stocks. I think PGNS at $12 is probably a bargain in the long term, but don't expect to see $20 any time soon. Peter