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Author: Digger65 Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 24974  
Subject: Re: If you were new to Biotech, what would you b Date: 3/20/2000 12:27 PM
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Brentus,

Didn't mean to belittle your question, but I did read it as someone asking "What should I buy" without spending the time to read back through the messages. And it does get tiring replying to those messages when so many of the existing messages on this board are discussions of stocks to buy. I don't always feel like rewriting the same message.

So here is a complete treatise.

I'll refer you first to a post I wrote on Feb 11th, #2370 at http://boards.fool.com/Message.asp?id=1020007000749002&sort=id

If you are looking for companies to branch out in, I would recommmend looking at the following. I am not recommending buying any of these, merely starting your due diligence with them. All of these are volatile, risky stocks, but I think they make a good core to start with.

For profitable, big biopharm companies, look at Chiron (CHIR), Genentech (DNA), IDEC (IDPH), and Genzyme (GENZ). I think Biogen is an inflated stock, and until they show they are not a one trick pony, I think they are too risky an investment. I think Amgen is a good company, but would like to see more out of their pipeline, especially some products that are not related to Epogen and Neupogen. And, although it will be in court for a long time, I don't want to end up following every detail of the TKT suit against them in case it looks like Amgen might lose.

For gene therapy, look at Cell Genesys (CEGE), Avigen, Genzyme Molecular Oncology (GZMO) and Ariad Pharmaceutical (ARIA).

For stem cells, I personally think Geron (GERN) is too risky, but could be a huge payoff down the line. I would stay away from CytoTherapeutics, but that is just a personal judgement. I got some bad vibes from an article I read a few months ago and suspect they are too cavalier in their research. I would also look at Nexell (NEXL) and Aastrom, who are focusing on details of the tools of the stem cell trade. Unrelated, but also both risky but with enormous promise are the two main antisense companies, Isis (ISIP) and Hybridon (HYBN).

For blood products, look at Biopure (BPUR) and Alliance (ALLP). Biopure is still trading a little high and could fall considerably on any even moderately bad news between now and the possible approval in 18-24 months, but will be huge if they make it through Phase IIIs, and will provide some great profit taking opportunities if they release a postive press release at the completion of the trial later this year or early next year.

Monoclonal antibodies will be huge over the next few years. While the products are being developed by many companies, Medarex and Abgenix are the two giants in develoment platform technologies. Both are expensive, and this is not the first place they have been mentioned. Everyone knows about them, and they are expensive, but they aren't going away.

Related platform technology concept would be the transgenic protein production, as in Pharming

For classic disease treatment therapeutics and cancer biotechs at the earlier stages of corporate development (as opposed to the Chirons, Amgens and Genzymes), look at Synsorb (SYBB), SciClone (SCLN), Geltex (GELX), Alexion (ALXN), Ribozyme (RZYM), AVI Biopharma (AVII), and Vertex (VRTX). Sepracor is interesting. Their business plan is the closest thing I've ever seen to legal extortion, shaking down the big pharmas like Eli Lilly. But it is scientifically and therapeutically valid, and hugely profitable.

For orthopedics and cellular therapies, Advanced Tissue Sciences (ATIS), Organogenesis (ORG), and Genzyme Tissue Repair (GZTR) are all interesting. Market is big enough for all three to do very well. I don't know much about IART but its out there too. GZTR is awaiting a merger vote with GZSP and BXM, so it get compicated. Lots of discussion on those boards. ATIS awaiting FDA info on a TGF-beta product, so short term volatility over the next few months. This area is, in my opinion, the undiscovered frontier for biotech investing.

Closelyl related is the very promising, very risky, investment into xenotransplantation, such as PPL Therapeutics which is focusing on organ transplant.

However, research this category carefully, including Genzyme Surgical (GZSP) and Biomatrix (BXM) mentioned above, QLT Phototherapeutics (QLTI), a little company called Focal (FOCL), and good old Johnson & Johnson (I don't know if they have a surgical biotech focused tracking stock or not). It is an area with relatively cheap market capitalizations and enormous potential over the next ten years, which all the momentum investors missed because they were hot on the genomic plays.

Speaking of the genomics, I reiterate, stay away from CRA, HGSI, MLNM, AFFX, HYSQ and the rest until you know more about the industry. Those stocks are overvalued, very volatile, and are carrying market capitalizations that are purely based on faith, hope and momentum. There is money to be made, but there is a lot of money to be lost.

I think that what I said about the genomics in the post I cited at the start of this message is still valid. As to the recommendation about staying away from the genomics, I also posted #2642 on whether it was worth buying in to Celera on Feb 19th.
http://boards.fool.com/Message.asp?id=1020007000832002&sort=id

I said at that time that I was against buying into CRA. The window had passed and it was overvalued. When I posted that message (2/19) CRA was at $157.91. It peaked at $242.00 on 2/25, but closed on Friday at $130. It is trading at $126 1/16 this morning. So was it worth it then? It depends on your time period. I still think than CRA, HGSI, MLNM, AFFX are overpriced and overvalued. Do your due diligence but remember that nobody has any idea of what the payoff will be to the companies providing genomic data, as opposed to what the payoff will be to the companies who develop products from that data.

Agbio is big, but the genetically modified food debates are an added complication. I don't know much about the field, but Monsanto and Pharmacia & Upjohn are merging, and Cerion is interesting.

Lastly, I don't like the straight anti-biotic companies for long term buy and hold, like Viropharma (VPHM) and Microcide (MCDE), because I think their days are numbered due to the monoclonal anti-bodies. But over the short term, next 2-3 years, these could be big payoffs.

So there is your list. I've skipped over dozens of popular stocks, included some not very popular ones, etc. Due diligence on these should take you about 10-18 months, by which time the entire playing field will have subtly shifted. Remember, there are a lot of companies out there. (At last count, I think there are around 700 biotechs in the US, of which about 400 are publicly traded.)

Digger65

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