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No. of Recommendations: 8
After posting this over on the Biotech board I thought I would drop by the GG board to open myself up to the true Pros in GG investing for their insight into my thoughts. I know that a while back there was a long discussion on how GG investing could be applied to the Biotech field. Since that time I have been chewing on why it is impossible to apply Moore's approach to investing in Biotech. What follows are my conclusions:

I have been trying to figure out why the discussions on biotech investing cause such a fuss. Should I use mutual funds, which are the "best five companies," etc. Clearly, investing in biotech is different than investing in most other types of industries. Let me elaborate my thoughts. After reading numerous books and articles on investing philosophies, I have come to implement a kind of Peter Lynch/Geoffrey Moore/TMF style to my investing. Basically, invest in good companies that have the potential for or are in hypergrowth that you can identify by just opening your eyes and looking around.

The question is, does this work for Biotech, and my answer is No. Further, I feel that fundamentally either on a conscience or sub-conscience level most investors feel the same way. So you might be asking yourself why do I feel this way in light of the fact that I have an advanced degree in this field. If anybody could understand this field I could.

Well it comes down to this, I believe the rules that govern initial acceptance in the market are completely controlled by external forces and not by the market itself. I consider myself in the early technology acceptors group. The fact that I am keen to investment opportunities a la Peter Lynch, allows me to see first hand that a technology is being accepted or that I personally find useful. However, in Biotech the FDA is the one that decides when the hypergrowth will start, and rightly so. Therefore, there is a disconnect between market acceptance and investing insight. A second line of thinking might conclude that because the FDA approval is pivotal to the success of a company, basically hypergrowth is guaranteed following FDA approval. Hence, uncertainty over market acceptance is replaced by uncertainty over drug efficacy.

One might argue that there is a bowling alley and chasm after a drug is approved and before doctors accept it as treatment. I would argue that it is probably so short lived there that from an investor's perspective it is meaningless. We and even the companies themselves (blinded trials) have no insights into how a drug is progressing within a single phase of a trial. Hence, any increases in value come by hugh steps up or down as trial results are announced at the end of each trial. But even these can be misleading, as companies move toward pivotal trials what might have looked promising in an earlier trial, may turn out to be insignificant. Human disease is a very complex process and may work differently in different people.

So what's an investor to do. Clearly biotech is/will be an industry with tremendous growth and as presumed above one where hypergrowth is assured if the drug works. Therefore, one needs to be invested in it if they want to participate. However, the loss of the Peter Lynchian philosophy "invest in what you see around you" makes one take pause of any reassurance that their investment is a good one. Moreover, one needs to appreciate that any investment in an early stage biotech company (prior to an approved drug) contains an element of gambling, where the odds are mostly unknown. Personally, I avoid mutual funds (mainly because of taxes issues) however, I believe that a mutual fund approach is probably the best approach...buy a basket of stock. For those of us without the wherewithal to but 5 to 8 biotechs, especially in light that biotech should only be a percentage of one overall portfolio, either suck it up and buy a mutual fund or understand that buying one or two biotech stocks is very risky.

Yo.
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Yo, I think the only way to play the Biotechs is the Roulette approach, cover the board and spin the wheel, if you are lucky enough to pick one winner it will cover your losers. I agree with your statement that the FDA determines success rather than the marketplace. All of this causes one to invest with any degree of safety only after a winner has been determined, investing before is pure gambling.
The FDA or failure in trials will pull the rug out from under you, even poorly phrased quotes from our elected officials will flush you out.

I'm not saying I would invest like this or recommend anyone else should either but I don't see another approach if one has his heart set on investing(gambling) in this sector. Way to much risk for me and I'm long Rambus...Pete/Goaltender95
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hey yo!
look into merill lynch's biotech holdr. symbol:BBH.

i've been keeping an eye on it for possible future investment when funds become available. it's a group of 20 leading biotech fimrs. you have to buy 100 share lots (currently priced at $182). but gives you good exposure to a possibly explosive sector.

--morgan (don't have a list of what they are handy)
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I disagree strongly.
The good Bios have been rewarded accordingly.
PDLI for instance - expected to be profitable this year
GENZ - relatively low PE and quite profitable

Are they gorilla candidates - probably not
Do gorillas need minding too - yes they do

QCOM dropped as much as most of the Bios
PDLI recovered half
GENZ near all time highs
QCOM in the toilet

P.S. Do not hold any bios at this time but have in the past and if PDLI drops too much more will sooner than later
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YoHo00,
Here is the excellent post from Tinkershaw which started the original discussion on the topic:

http://boards.fool.com/Message.asp?id=1360002000422000&sort=id

I think most arrived at the same conclusion as you (but not all!). Also included (by me) was an e-mail from Geoff Moore with his opinion on the topic:

http://boards.fool.com/Message.asp?id=1360002000433000&sort=postdate

Then, BruceBrown, in a snit, admonishing Tinkershaw for bringing it up in the first place:

http://boards.fool.com/Message.asp?id=1360002000431000&sort=postdate

But, IMHO, it certainly bears watching. Things change and it is certainly an area that will eventually experience explosive, tornadic growth.

Tim
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YoHo00,

I do think that the underlying priciples of GGing can be applied to Biotech. It's a bit like expanding into the internet world. While the specifics change, principles like discontinuous inovations, winner-take-all competitions in hypergrowth markets, barriers to entry and swithching costs are all applicable.

I think that the key here is to look at the drug development cycle in its forward looking much shorter cycle rather than the backwards looking much slower cycle. With this view, the market moves from individual drug candidates, to technology platforms. This is the principle that I believe is powering the CRA and MLNM returns. Earlier in a similar cycle, MYGN, MAXY and EXEL seem to fit.

Cheers, Dan
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No. of Recommendations: 5
tjbd wrote:

Then, BruceBrown, in a snit, admonishing Tinkershaw for bringing it up in the first place:

http://boards.fool.com/Message.asp?id=1360002000431000&sort=postdate

I stand steadfast by my 'snit' today, just as I did the day I wrote that 'snitty' post.

BB
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No. of Recommendations: 2
I stand steadfast by my 'snit' today, just as I did the day I wrote that 'snitty' post.

The Gorilla Game revolves around standardization and industry positioning. I don't see how the average biotech could possibly fit into this model. How does Amgen or Medimmune effectively become a toll bridge operator or develop Microsoft standardization?

It doesn't. Trying to apply Gorilla Game techniques to Biogen or Immunex is like using past football scores to pick the the NBA finalist.

That being said I feel the board unfairly looked past Affymetrix. Affymetrix is a picks and shovel company for the biotechs. Heck, they are more a chip company than anything biotech. Though I have no position in AFFX I recommend GG'ers look into AFFX as a potential future gorilla.

DP
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No. of Recommendations: 7
DP:

The Gorilla Game revolves around standardization and industry positioning. I don't see how the average biotech could possibly fit into this model. How does
Amgen or Medimmune effectively become a toll bridge operator or develop Microsoft standardization?

It doesn't. Trying to apply Gorilla Game techniques to Biogen or Immunex is like using past football scores to pick the the NBA finalist.


Dan, The companies mentioned by Tinkershaw were Abgenix
and Mederex:

http://boards.fool.com/Message.asp?id=1360002000422000&sort=id

And it IS a picks and shovels situation, IMO. Geoff Moore talked about the Biomed industry not being in control of the technology adoption due to the need for gov't approval of drugs and processes, etc.

But if you read Tinkers post, these two companies wares ARE being licensed already. The research is going on now and so far, there has been no need for gov't oversight.
Naturally, that will change when someone develops a drug using this technology and wants to bring it to market.

With a few differences, this is a similar situation to the one Qualcomm is facing now, companies may freely license Qualcomms technology, but governments in places like China and Korea have a say in how and when companies in those countries can begin implementing it.

It's not the same situation here in the US, and that's why there are competing standards, but European governments, too, have significant influence on which technology will be adopted there.

So if you read Tinkers post again with QCOM in mind, you may (or may not) begin to see a possibility there.

In any case, I didn't think it deserved to be dismissed out of hand as it was obvious to me that a great deal of work went into the research behind that post.

And it seems to me, we benefit greatly by finding a gorilla game in places others are not watching, for whatever reason, and getting in there before the mob.

Abgenix and/or Mederex may/may not end up in a gorilla game. True gorillas are VERY RARE. But you can't say, without the benefit of hindsight, that you would have picked Cisco or Siebel at the same stage in their development. Or maybe you can, people can say what they want, it just might not be credible.

With that in mind, how can anyone say that there will/will not eventually be a gorilla game in any high=tech industry so early?

Ofcouse, that's just my opinion. FWIW BWTFDIK, etc.

Tim
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I stand steadfast by my 'snit' today, just as I did the day I wrote that 'snitty' post.

BB


Bruce,

I meant no disrespect by labeling your post a "snit".
I have lavished your posts with recommendations as often as the next guy, but I felt that your cutting Tinker off at the knees that way was inappropriate for the reasons I have stated already.

There are some who post here that do a disproportionate amount of the heavy lifting, Tinker being formost, I believe, and when he gets excited enough about a topic to do all that work, and then share it with us FOR FREE! I think it is worth discussing.

Furthermore, I think that just as much can be learned from discussing why a company IS NOT a gorilla as one that is.

There are many ways to learn. This board has been an invaluable resource, and it's thanks to people like Tinkershaw and you, who selflessly give of their time and knowledge and expect little in return but consideration of their ideas.

That consideration doesn't cost me anything and I give it freely.

So even though I don't always agree with what you say, I will fight to the death your right to say it (OK, maybe not to the death, but to SOME extent).

Thanks again.

Tim
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No. of Recommendations: 30
Tim,

I feel like I am in the middle of a no win situation no matter what I say on the issue. Hence, I enter this post with some trepidation. I certainly viewed my comments (snit) as more of an attempt to focus this board on what the book The Gorilla Game was designed to address in high technology rather than any limit of free speech. Even Michael Murphy keeps high technology and biotechnology separate. He has two separate newsletters to cover those industries. I know those newsletters well, believe me.

...I felt that your cutting Tinker off at the knees that way was inappropriate for the reasons I have stated already.

If there is one thing I have, it's complete confidence in Tinker supporting his own views. He is one of my favorite Fools and I benefit from his posts and discussion as much as anybody else. I guess it really isn't my place to limit discussion or attempt to focus a group of individual investors by 'cutting them off at the knees'. If my 'snit' was taken as that, I'm very sorry and apologize. Likewise, I am not attempting to get recommendations or 'force' group agreement on everything. Without going back on this thread to view all of the biotechnology posts that did occur, I can simply rely on my memory and say that there were a number of posts and interest for enough companies that were mentioned to draw focus away from the games in the high technology market which the book does address. If we were to continue full coverage of those biotechnology companies on this board I still fear the mixed bag would be a loss of focus on the high technology companies. Having a board devoted to gorilla gaming in biotechnology solely would be visited by all of those that were generally interested and allow the two separate threads to not get in the way of each other. I don't think that is such a 'rocket science' idea and would help all Fools involved without any mudslinging. It simply would take a Fool to contact the staff and get a board started entitled 'gorilla gaming in biotechnology. Plain and simple as that.

Perhaps many think I am way off the mark in suggesting development of a board solely devoted to applying the prinicples of the gorilla game to biotechnology. I still think the idea has merit in establishing a board devoted to it. Even Murphy's example of keeping the industries separate is a valid one in my opinion and in the opinion of the thousands of subscribers to his newsletters who have voted with their subscription fees. I'm always cautious about mixing and melding criteria into other areas where too much gray matter appears. Especially when it is our real money being invested in real time. The biotechnology mania in the 1980's was a real bloodbath for many unsuspecting investors. Billions of dollars simply vanished. Perhaps not all remember that era, but I remember it all too well. Being that we have plenty of work to keep us occupied with what the book was originally intended on this board, I remain skeptical about melding and mixing because of all the issues we have raised on the subject over the past 6 months to year. For that reason alone, I remain interested in seeing the GG principles applied to biotechnology on a focus list devoted to that solely rather than mixing it with the current topics in high technology investing.

It's been a pretty well discussed issue on both Internet based gorilla game threads. Allow me to point out some of that discussion with the G&K leader Uncle Frank's comment a few months ago concerning biotechnology:

SeldomBlue wrote:

[We should not limit our hunting ground to only certain industries.]

UF responded:

"Why not? I mean from the point of view of a cooperative effort on this particular thread? If we go too far afield we stand the chance of becoming a mile wide and an inch deep. Gorilla gaming requires a lot of dd, and we've assembled a team with core expertise in networking, wireless, etc. Why should we feel compelled to divert the gang's efforts to satisfy the curiosity of a distinct minority?"

No matter how it is mentioned, Frank points out an important issue about the concern of getting too broad and how this has the possibility to lose the intended focus for the greater good. Likewise, if a board was set up for applying GG criteria to biotechnoloy issues alone, it would run the same conerns of getting too broad if we started talking about Brocade, Network Appliance, Qualcomm, Ariba, i2, Intel, EMC, Cisco, Microsoft of discontinuous innovations that threaten any of these companies in the middle of all the biotechnology format.

Here's a post by Mike Buckley addressing something that Tinker brought up on the G&K SI thread:

For readers who think I am coming on too strong about the perception of risk regarding companies such as MEDX and ABGX that Tinker is putting in front of us, the combined twelve-month trailing revenues of those companies is less than $30 million.

For him to mention Intel, SAP, PeopleSoft, Cisco and Qualcomm in the same post as if suggesting that the risk of those companies is remotely comparable to MEDX and AGBX is incomprehensible to me. For those of you who aren't aware of those firms, PeopleSoft is by far the smallest with $1.5 billion (with a "b") in trailing revenue.

If the novices lurking or participating in our folder would prefer that I shut up about this, please e-mail your request to me. I'll consider the possibility with an open mind because it is only the novices that I'm thinking about in this train of thought. Otherwise, I'll always be on the vigilant look-out to help keep this stuff in perspective for the novices who understandably have a difficult time doing so.

--Mike Buckley


Here's Tinker's reply:

http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=13323219

Now you have to know the entire thread development to get an accurate reading of it all. I would suggest taking the time to read all of those posts over at SI to see what was openly discussed. There are quite a few that stretch for a period, but take the time to follow along. You'll even find links to discussion of biotechnoloy on the gorilla thread from the previous year.

Tinkershaw wrote this post on the SI G&K thread in March when biotechnology was flying high along with everything esle at the time:

http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=13319905

Just to really irritate you all:

I found another G&K game in bio-tech. This time in micro-fluidic technology. The players being Caliper (CLPR), Orchid Computer (private), and Aclara (ACLA).


Here are a few responses to that post to begin with:

http://www.siliconinvestor.com/stocktalk/msg_multireplies.gsp?msgid=13319905

Here's a reply from Mike Buckley on the subject:

http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=13319835

Here's the original biotech post he wrote on that thread:

http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=13319159

Here are a few initial response to that post:

http://www.siliconinvestor.com/stocktalk/msg_multireplies.gsp?msgid=13319159


Furthermore, I think that just as much can be learned from discussing why a company IS NOT a gorilla as one that is. There are many ways to learn. This board has been an invaluable resource, and it's thanks to people like Tinkershaw and you, who selflessly give of their time and knowledge and expect little in return but consideration of their ideas.

That consideration doesn't cost me anything and I give it freely. So even though I don't always agree with what you say, I will fight to the death your right to say it (OK, maybe not to the death, but to SOME extent).


Regardless, I don't want to alleniate anybody. Rather, I would like to help establish and distinguish the differences of the two forums for discussion. I continue to believe that two separate forums would easily take care of the issue and those interested in one or both could easily participate. Establish the board and bookmark it. I see this as beenficial to all and it keeps the premise of what the book was intended to focus on for this board.

BB
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Subject: Re: Biotech and GG revisited
Author: BruceBrown Date: 7/15/00 4:05 PM Number: 3484
**********************
Just want my first post here to reflect Bruce Brown's sentiments on keeping BioTech from Tech. Please read his posts carefully or, I believe, this board and all it's history and research will be sadly diminished.

http://boards.fool.com/TopBoards.asp?asof=rec

It brought me out of the lurking mode.

Pat
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**********************
Just want my first post here to reflect Bruce Brown's sentiments on keeping BioTech from Tech. Please read his
posts carefully or, I believe, this board and all it's history and research will be sadly diminished.

http://boards.fool.com/TopBoards.asp?asof=rec

It brought me out of the lurking mode.

Pat


Lemme see if I've got this straight... Keep doing your research for you, but only on topics that YOU are interested in?

Got it. Thanks
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Remind me never to get in a debate with Bruce without an arsenal of past posts immediately in my command. :)

--Mike Buckley
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Lemme see if I've got this straight... Keep doing your research for you, but only on topics that YOU are interested in?

Got it. Thanks
**************************
Not me, us. The Gorilla Game Board.

Pat
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No. of Recommendations: 31
tjbd,

Lemme see if I've got this straight... Keep doing your research for you, but only on topics that YOU are interested in?

A lurker has as much right to express an opinion about the content of a folder as a participant. I don't think for a minute that you're doing research "for Pat" any more than I think I, Bruce, Tinker or anyone is doing research "for" him/her. So I ask that you please help foster a spirit of cooperation and feelings of good will toward participants and lurkers alike.

-Mike Buckley

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Dan, The companies mentioned by Tinkershaw were Abgenix
and Mederex:


Tjbd,

Actually I had forgotten about Tinker's looks at these 2 companies last spring. Thanks for reminding me. I was the one who brought up Affymetrix, a company I still believe is more akin to a semiconductor/chip company than it is to Biogen. Very interesting story unfolding with AFFX.

Check ElricSeven's posts regarding AFFX's position. I believe he covered AFFX for Soapbox too.

DP
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I haven't read any posts on this board except Mike Buckley's defense of Pat.

Whoever criticized Pat should know that the full retribution of the BOARD OF PURE EVIL will be unleashed upon his next transgression.

swimdad, the Elder
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Wow,

What a response...

I followed the first few posts and then took a short hiatus. Sorry, to bring up such bad blood...

I even got MB and BB to respond on one of my threads, in a twisted sort of way I feel honored. Anyway, if you all remember the original post my conclusion was that GG and Biotech do NOT mix...

"The question is, does this work for Biotech, and my answer is No."

So its off to the new Biotech Gorilla Game board to see whats happening over there.

Yo.
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I don't think for a minute that you're doing research "for Pat" any more than I think I, Bruce, Tinker or anyone is doing research "for" him/her

hey, I thought your research for me on Siebel was pretty good, BWTFDIK...

tekboy@notmentioningsomeofyourotherresearchoutofpoliteness.com
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