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Posted this on another board, with no response.

If I wanted to create a portfolio exlusively in Bio, and I wanted that portfolio to be diversified across Bio what would it look like? My preliminary thoughts:

Bioinfomation

Pick and Shovel (sorry, but my brain is mush right now, and I cannot think of the proper name for this type of company within Bio -- the companies that make the chips and probes and stuff)

Bio Drug manufacturers


Have I missed some categories that I should consider?
Doug
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Here's my ideas on the route I diversified my biotech portfolio (for the most part, a developmental, high risk-high reward group)...

http://boards.fool.com/Message.asp?id=1020007000726002

I'm probably lumping the companies you call picks and shovels and bioinformation into genomics and proteomics.

Hope its helpful
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Doug

jim686868 has the right idea in his post on picking biotech stocks. Spreading your money over several sub-sectors of biotech. That's also been the approach of the Gene Phool Porfolio. -- see board by that name.

You can't paint the genomics area with too broad a brush. There are differences in focus and in important strengths or expertise.

CRA and INCY are more or less similar in that they are focused largely on being sources of information, although in both cases, they are much more than that.
Not sure who's the best? buy em both.

HGSI and MLNM are alike, in that they are vertically integrated. They do basic genomics research, but also functional genomics, proteomics, drug discovery, manufacturing and marketing. HGSI has their own drug factory waiting for the first successful drug. I'm not as familiar with MLNM's manufacturing plans. They both also develop drug targets individually and in collaboration with other companies. MLNM has many focuses, including large scale industrialized research technology and facilities. Heck buy them both too if you can.

Cell Genesis CEGE gene therapy. drugs in clinical trials. The company that created another great biotech, Abginex, which CEGE still owns 12% of. This stock is cheap, based on its cash of $250M and it's shares in ABGX. The result is your paying very little for the actual company and it's prospects, which seem to be good. They also have lots of patents.


Genome Therapeutics GENE is in gene therapy. They also have a database of genomic information of bacteria, microbes etc. drugs in clinical trials.

Targeted Genetics TGEN is another interesting gene therapy co. Drugs in clinical trials, various vectors in their quiver.

Ariad Ph. ARIA is another gene therapy company worth a look. Their gene expression activation and expression control technology has raised a few eyebrows.

Gene Logic GLGC works closely with Affymetrix in the area of gene expression research. They have a database of expressed genes in all kinds of tissue, both human and otherwise; both healthy and diseased tissue, etc.
They recently got access to a library of neural tissue in progressive stages of growth from neural stem cells to mature neural cells. They will do expression analysis on these tissues and add that to their product line. This may be a key to learning how to direct the growth and differentiation of stem cells into mature cells.

Myriad Genetics MYGN strong intellectual property in important disease related human genes. Proteomics focus also, which is a big plus, as that will be a very important area.

Other related stocks are Curagen, Aurora Bioscience, Hyseq. My lack of comments is not meaningful.

So you see there will be a demand for all these services, they don't all compete directly and in fact are often customers and collaborators of each other.

Do your homework on these, these are just breif summeries to give you some ideas.

And you're right, it wouldn't hurt to own a few big drug stocks. They're down still, and over the long haul they usually do pretty good. Look at a ten year chart of some of them. like MRK SGP etc.

And there are, of course, all the other drug development companies of various types as referred to by jim686868.

And there's the tool makers, AFFX, PEB
Other interesting companies in this tool area are;
LYNX LMNX NGEN SQNM CALP MDCC and
Illumina(going public this month).
HYSQ INCY and GLGC make microarrays also.
It's a hard area to make a call on at this stage of development. All these companies have interesting technology. AFFX MDCC and PEB are the strongest market players at present. But the others have new exciting technologies, none of which has established itself yet as a dominant player.

There are lots of oppurtunities and as you say, there are lots of risks. Owning several helps spread the risk. I've gone from having two biotechs, to now having 16 of them, in the past year. I've used some of my gains to diversify within the sector. Even at that I'm limited to genomics, gene therapy, tool makers, and Chiron which is a more broadly diversified biotech.
Abginex or Medarex would probably be my next pick. They share an interesting niche worth lookin into.- Fully human monoclonal antibodies grown in transgenic mice. Genzyme Transgenic is related, except they use cows or goats or something.




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If I wanted to create a portfolio exlusively in Bio, and I wanted that portfolio to be diversified across Bio what would it look like?

Thanks, jim and flyer. Using your input, it seems that my categories could be refined to include:


   Information

   Tool makers

   Drug discovery

   Drug manufacturing


I'd love to get more input on the categories before I move into placing companies within those categories. Anyone else want to comment?

Doug
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"my categories could be refined to include:


Information

Tool makers

Drug discovery

Drug manufacturing

Anyone else want to comment?"


Doug,

All the companies in biotech need one basic thing...the protein, DNA, RNA to do their reseach and development on. Everyone from CRA, PEB, MLNM, INCY, etc needs these basic compounds. How about a company that makes equipment to isolate them? This would fall into the tool makers.

One of my favorite companies is Qiagen (QGENF). They make kits, among other things, that isolate the nucleic acids and proteins that others need for their research. Even PEB needs pure compounds to run the samples.

See what you think.

Ralph




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I read your article with interest and find I have two of the stocks you mentioned, ARIA and GLGC. However, a third one, ASTM, was not mentioned. Do you have any comments on this stock?
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yvonneb

I don't know much about ASTM. I think there were a bunch of posts about ASTM on this board, or maybe the Gene Phool board. Try a search.

I would have bought GLGC when it was in the low twenties recently if I had any buying power/cash. I bought ARIA at around $20 on the way up and still have it. I think they are an exciting company. I forgot to mention their recent news about activating stem cell growth, using their Argent technology.
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ProMetic Life Sciences

ProMetic Life Sciences (TSE: PLI ) is another company that is involved in protein separation. Through its BioSciences subsidiaries located in Cambridge (UK) and Montreal (Canada), it is an international biopharmaceutical company engaged in the research, development, manufacture and marketing of a variety of commercial applications from its proprietory platform technologies.

ProMetic develops synthetic organic entities known as Mimetic Ligand ™, which are designed to effect very specific interactions with proteins (in blood/organ, transgenic fluids or fermentation broth). Mimetic Ligand™ are developed to target three major areas of commercial application: Bioseparation, Biomedical devices, and therapeutics.

The company has strategic alliances and supply agreements with the following :

- - Novo Nordisk -ZLB (Swiss Red Cross)
- Bristol Myers Squibb - American red Cross
- Centeon - Fresenius
- Bayer - Provalis
- Vitex - Delta
- Genetech - Boigen
- Genetic Institute - Eli Lilly
- Genzyme TG - PowderJect


I attended a road tour meeting last week and spoke to the CEO (Pierre Laurin). He said that interest in their technology is growing and that companies are now approaching them -one of the most resent was Amgen.

ProMetics initial strategy was to manufacture and market generic pharmaceuticals. However, the capital intensive nature of the pharmaceutical segment created a financial strain which led to the divestment of the pharmaceutical component last year. The company seems to have worked through its problems ( the stock dropped to a low around $0.2 last year and closed at $ 1.60 on Friday). The CEO made the following comments regarding revenues (Canadian dollars).

- expect to be profitable when revenues reach $12 million or so-likely achievable by mid 2001.
- Revenues by 2003 should are projected to be in excess of $30 million .

He showed a graph of projected earnings -growth was exponential. Mr. Lauren emphasized that the company was not interested in "selling out" to early and wants to focus on long term revenue growth.

Mr. Lauren said that they will have a web site by July7,2000. I understand that the ULR will be www.prometic.com


I believe that demand for good protein separation and purification technology will increase as the Genome project advances and that the company with the best technology will do very well. On the surface Prometic seems to have a lot of potential but I don't know how their technology compares to other processes that are available. I would appreciate any feedback anyone may have about alternative methods for isolating and purifying proteins . It is my understanding that some of the companies with competing technologies are:

- Pharacia Biotech
- Merck KgaA
- TosoHaas
- BioSoopra Inc
- PE Biosystems
- Dylax Corp


I can evaluate the technology on paper but am looking for feedback from people with hands on experience.

I have been following this stock for about a year and have just taken a small position in it.
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Sorry,that post got away on me. Here is the list again.
Novo Nordisk
Bristol Myers Squibb
Centeon
Bayer
Vitex
Genetech
Genetic Institute
Genzyme TG
ZLB (Swiss Red Cross)
American Red cross
Fresnius
Provalis
Delta Biologics
Biogen
Eli Lilly
PowderJect PLC

Hope this helps.

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doug,

Depends on what you mean by 'bio' and what you are trying to capture. Do you want an investment portfolio that captures everything related to the biological sciences?

A couple of months ago I answered a post about biotech. You might find it interesting, its msg #3521: http://boards.fool.com/Message.asp?id=1020007001147006&sort=id

I think you need to differentiate a bit more, as some of the other people who responded to your post mentioned. If you want to capture "bio" there are a lot of 'flavors' and subsectors moving in different ways.

You should include an agbio play rather than just focusing on therapeutics, like Aventis Cropsciences, Cereon Genomics, or Pharmacia (Monsanto),

Definitely include a large pharma, like Novartis, Merck, GlaxoWelcome, Aventis, etc. rather than all biotech.

Also, differentiate between big pharma focused on small molecule therapeutics from big biopharm focused on protein therapeutics (Genzyme, Amgen, Chiron, Genentech, Idec...). And next level down, differentiate between the big biopharm producers I just mentioned, and some of the smaller biotechs just scaling-up their first products.

One poster mentioned ABGX, MEDX and GZTC. Abgenix and Medarex (along with Cambridge Antibody Technologies) are technology platforms for identifying and creating monoclonal anti-bodies, but they aren't production systems. Genzyme Transgenics is a production system which will compete with cell culture. That is a very different beast (pun intended).

For investment risk and payoff, differentiate gene chip companies (HySeq, Affymetrix, Lynx...) from biotech diagnostics companies like Chiron, Genzyme and Techne.

There is a whole, profitable, world out there focused on veterinary medicines rather than just human therapeutics, also.

Lots of work in the bio field on things like pesticides and fertilizers, too, although much of that borders on what most people would call the chemical industry. However, chemicals for biologic processes put into products are certainly different than chemicals manufactured as bulk ingredients for things like batteries or materials engineering.

Also, environmental remediation is a large and growing field which I would call 'bio', although only part of it is strict biotech. A lot of it is really environmental engineering.

Last but not least, without white lab coats civilization as we know it might not exist. Any bio portfolio should include one manufacture of white lab coats. But it has to be a real manufacturer for white lab coats people use. So if Donna Karan or Abercrombie & Fitch start putting them out, it won't count. Personally, I would also invest in 3M since they make most of the tape that biologists wrap on the bridges of their black eyeglasses when the frames crack. :)

Digger65
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Digger,

Thanks for the info. (I am busy digesting it!) One question, prompted by your comments and some of the information I have found on companies' websites:

What is the difference between pharmaceuticals and therapeutics?

Doug
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All intersted in biotech might like to read the recent book - oh I know that the field shifts quickly, but here is some basic info - by Matt Ridley "Genome".,

In addition the firm GERN, now in cooperation with Celera CRA, has dep roots into the matter of stem cells via its jv with the UK group that cloned dolly and that has gone on to make other discoveries.

THE HOLDINGS LIST OF drbnx, WHICH IS RUN BY A BIOTECH DOCTOR, IS INTERESTING too.
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Avis86

your list of proetin spearation companies is pretty good

- Pharacia Biotech
- Merck KgaA
- TosoHaas
- BioSoopra Inc
- PE Biosystems
- Dylax Corp

you missed out BioRad, understandable since it's privately owned.
Beckman-Coulter have a small finger in this pie as well.

I think APbiotech (Amersham-pahrmacia biotech) is the recognised leader in quality. But there isn't that much between them and the others.

Personally I think the big gains are to made in robotics so I'd keep a close eye on the impact of companies like PEB and Beckman which have strong robotics and a presence in this field.

I actually tend to think that there is considerable consolidation coming in the bio equipment market as the stakes become larger. So this whole area is likely to become quite messy in the near future and I expect to see some of the smaller specialised companies get bought out as the bigger companies try to establish a dominance. Of course there will always be small university engineering workshops, and they tend to spawn companies :).

cheers
Bart
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Thanks Bart,

That's the kind of information I've been looking for.

Avis86
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In this on-going saga of discovery, prompted in part by the responses I have received here, and in part by reading through past messages on this board -- I am particularly indebted to a message by domsheldon1 that I found in a link on version 2 of the FAQ (as an aside, why does the link to the FAQ currently point to version 1?) -- I'm ready to expand my categories once again:


Meta Companies, which span several major areas

Information

Tool makers providing diagnostic kits, biomedical materials and bioactive devices

Technology Clusters
   Monoclonal antibody
   Genetic Modification (Gene Therapy?)
   Cell Culture
   Biosensor
   Antisense
   Protein Engineering
   Cell and Tissue Therapies
   Drug delivery systems

AgBio


With this in hand, I think that I may be ready to consider companies that fit within each category.

Doug
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Now that I have an idea of the breadth of the biotech "industry", I want to take a look at some of the companies that fit into each area.

Starting with Meta companies (those that span multiplie areas), I came up with these companies:

- Amgen AMGN (develops, manufactures and markets therapeutics currently in areas of pncology/hematopoietics, neurobiology/endocrinology, and inflamation)

- Biogen BGEN (develops, manufactures and markets drugs primarily for multiple sclerosis, inflammatory, respiratory, kidney and cardiovascular diseases and in developmental biology and gene therapy)

- Chiron CHIR (develops, manufactures and markets drugs focusing primarily on biopharmaceuticals for infectious diseases, cancer, and cardiovascular diseases, blood testing and vaccines)

- Genentech DNA (develops, manufactures and markets protein-based pharmaceuticals)

- Genzyme GENZ (develops manufactures and markets specialized pharmaceuticals and therapeutics, genetic diagnostic services, and diagnostic products)

- ProMetic Life Sciences TSE: PLI (mentioned by one poster, I was unable to find much information on this company)

- Human Genome Sciences HGSI (develops manufactures and markets pharmaceuticals that use the human body's natural substances -- genes, proteins, and antibodies -- to repair, rebuild and restore to normal health damaged, diseased and aged tissues)


Have I missed any? Any of these that don't belong? Anyone want to expand on the basic description of any of these companies?

Doug
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ProMetic certainly don't belong on the list with the big boys. They were a little Canadian generics manufacturer that never really got off the ground. At their inaugural shareholder meeting in June of 1999, CEO announced 400% revenue growth for 1998. Last summer they raised a few million dollars with private placements of their penny stock. (They were selling it for 85 cents, or with warrants attached for $1.10)

In January of 1999 they purchased a small UK chromatography technology company. In September of last year they went into bankruptcy and ended up liquidating their Candian operations to pay their creditors. They survive as a small UK company called ProMetic Biosciences. The shares had a 52 week high of $3.45

Also, HGSI doesn't belong on the list. They are a genomics company with a product in trials and a business plan designed to make them into the next Chiron or Genzyme, but they have a long way to go. When they get a product developed and on the market, I'd consider adding them to this list, along with Millenium, who is also heading towards becoming a diversified biopharm company.

Amgen, Genzyme, Chiron, Genentech and Biogen all started in the late 70s and early 80s, and have all been profitable for more than a decade. They (along with Agouron, who was purchased by Warner Lambert who was purchased by Pfizer - and Cetus, who went bankrupt and was bought by Chiron - and Genetics Institute, purchased by American Home Products) started the whole industry.

Of the companies you mentioned, Genzyme and Chiron are by far the most diverse. Don't forget that Genzyme is made up of GENZ, GZMO, GZTR and GZSP. Those stocks are tracking stocks for Genyzme divisions. The GENZ stock is the therpeutic and diagnostic products part of the company, where the profits are. And Chiron seems to have a jump start on vaccines for the Chinese market,plus about $1 billion in cash from the sale of some facilities last year which they plan to use for who knows what. Amgen and Genentech are probably the most successful, all things being considered, with several blockbuster products.

Biogen is Wall Street's darling. All of the products and technology it developed early on (it is the second oldest biotech, founded in Switzerland in 1976) were licensed out. The only real product it has is Avonex, which is hugely successful. Its pipeline looks a little thin to me, mostly new indications for Avonex. However, they are putting up a new building and look to be doing well.

Digger65
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Thanks, Digger. So my list of Meta Companies now includes:

Amgen
Biogen
Chiron
Genentech
Genzyme

So how do I evaluate these companies? For a preliminary analysis, I have chosen to use the Clinical Index discussed on ElricSeven's research board, which will give me some idea of future products, as well as Net Income/R&D and Net Sales/R&D, which give some insight into how a company turns R&D into Sales and Income.

[The basic formula for the Clinical Index can be found at http://boards.fool.com/Message.asp?id=1380646000018000

I have chosen to include one listing of any drug already in production that is under trial for other indications. The reasons for this are found at http://boards.fool.com/Message.asp?id=1380646000057002.]

My results:

CI S/R(99) S/R(98) I/R(99) I/R(98)
AMGN 6.964 3.698 3.791 1.333 1.301
BGEN 4.374 2.806 2.228 .997 .783
CHIR 7.158 2.341 2.388 .529 1.818
DNA 6.358 -3.116 .459 2.829 1.812
GENZ 5.088 6.094 7.727 1.377 1.819

Ranking each of these companies on the three metrics, with lower scores being best, shows that:

Amgen: 2, 2, 3 = 7
Genzyme: 4, 1, 2 = 7
Chiron: 1, 3, 4 = 8
Genentech: 3, 5, 1 = 9
Biogen: 5, 4, 5 = 14

Any thoughts on this?

Doug
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