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

To: mike head who wrote (213)	6/6/1999 8:38:00 PM
From: Mike McFarland	Respond to of 52153

The article give a lot of good PR for Corixa-- That's one which, especially after Gates threw 50M at it, probably has very good prospects for long term success, but is not especially cheap relative to other biotechs of the same caliber. If you look into what CRXA has going for it, it's history, the sense you get for the value of it's intellectual property, I for one would not have guessed that it has a marketcap of over 200M--maybe I do not know enough about the company however. And at nearly six times book value...well, as you already know, I'd rather throw some darts and buy stuff that trades at one to three times book value. Maybe folks are extrapolating out the handful of phase I clinical trials...and they see this one like a baby IMNX... but it's a long way from any real revenue. If you're going to have two separate valuation models, one for third tier--low multiples of book value, and one for mature biotech--high multiples of sales, then CRXA is certainly being valued by some mystery model somewhere inbetween. Well, let me get back on topic, I wanted to suggest something about investing in these critters: Fortunately, recognition is dawning that long-term investment is needed for the proper development of this new industry. The ideal would be for institutional investors, particularly pension funds with longer-term needs for returns, to make equity investments with five- to seven-year terms. But nothing like that has emerged yet, although individuals with a background in medicine and business are attempting to do so. You know, I'd be very happy if there was a way to make a longer term comitment to one of my biotech stocks--if there could be some assurances that they were not going to pull stunts like the Ariad toxic. (the rest of this pretty much turns into a rant, sorry) I was reading through the ARIA annual report, which came just yesterday (I tend to wait for the paper copy) and this company has a lot of history, a lot of IP, a lot on the table. This one is half the price of a Corixa at three times book, and arguably has a lot more going for it (IMHO!) That Ariad has a mere marketcap of 33M is just mindboggling, and yet, that is the point--that the market will discount a biotech like Ariad, presumably for firing Gilman and doing the toxic, but reward Corixa because it has the king's blessing. Strange days, I just hope I can occasionally muster up a few good trades, and that a few of my cheap micros start performing. It wont take much, with everything I own, the values seem more to be a matter of sentiment--and you might as well try and buy what the market hates...that's the only place the stocks are on sale. Hehehe, I even bought some gold stocks the other day by way of a gold fund...I just love a sale. Unfortunatly, the market lately rewards those folks who buy things which are expensive, and who are able to sell those later when they're even more extravagant, to bigger suckers yet--how long have we been in this 'MOMO' market, seems like a long time, several years I think. Well, at least the I-nuts have taken a few steps back toward reality, so that is good. You do worry that with people getting all worked up about the Yahoo's and the AOL's of the world, that this is going to be a repeat of 1929--but with the air coming out of those and the market broadening out, maybe it's all work out without a crash, and money will simply slosh into value instead of getting scared out of the market entirely. Microcap biotech and gold, those are my value stocks. Who would have thought ten years ago that it was going to turn out this way!