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speedybure (< 20)

Best Biotech Bets: Great entry point as focus was on pharma consolidation.



April 16, 2009 – Comments (0) | RELATED TICKERS: GENZ.DL , CELG , AMGN

 For the most part I am one to avoid the biotech industry due to the inherent risks, but one must have a dynamic investment philosophy when opportunity is knocking at your door. I refer to my dyanamic philosphy as willing to put money to work when there lies a great amount of qualitative value and my own "margin of safety" -Ben Graham, calculation is met.


These may have been two very highly talked about equities in the past, but they have fallen out of favor due to arbitrary factors (good and bad).

I which to first focus on Genzyme, which is a gem in the mid cap biotech company  (technically large cap). They cater to niche markets and illnesses, which they proved to be a unique and desirable model. They often get orphan drug status/ drugs fast tracked through the FDA process because of this. So in other words, aside from their two potential blobkbusters, the rest of their portfolio contain drugs catering to s small community. But below average  annual revenue per drug (relatively speaking), they usually have a much longer patent life. (Remember the patent begins when the molecule is patent by the company). I think they are currently trading at +/- 10% of their intrinsic value solely based on their current product portfolio ex-myozyme(potential blockbuster). All of this alone isn't enough to make me want to initiate a starting position with genzyme. The very overlooked aquisition of bayers oncology assets and their MS drug Campath. This drug has the potential to transform this company into one of the big boys of biotech. The flagship drugs have yet to hit full stride in terms of sales as Myozyme has had a slow launch and such, which I think will exceed investors expectations by a fair amount. This is a great entry point due to significant potential catalysts now through 2012 ( large quantity of phase 2 and 3 drugs and the news that will accompany results, drugs entering international markets (applying for), low myozyme expectations which could provide eps upside, campath newa/results). Given their succcess with the drug approval process, pipeline of drugs, managment team and current valuation, genzyme is worth a gander.


Celene on the other hand has become a valuation story. The Internal rate of return of their key drug revlimid is worth 60-65% of the market cap as of yesterday. This is incredible given the fact revlimid will likely be apporved in new markets, as it can potentially treat a large range of cancers. Managment claims there are nearly 50 potential applications, that is an overstatement, but I have found (I'm not a science junkie or anything) 5 likely applications, so I could say with confidence that there are 10+. There still lies potential international markets to penetrate with revlimid. Vidaza (i don't know if that is correct spelling) will become their second biggest drug when thalidomide goes generic. Celgene has a great management team as well, I owned some shares before revlimid and it doubled twice, although the risk avoider in me cause me to get out much to early. I continue to be impressed by the strategic move and vision of this company. I would not be talking about this comany if were at 65 (which is was last oct or so), but when I saw it yesterday ay 37 and change, I found out eps in q1 didn;t meet market expectations. the fundamental strengths did not change, the market is just irrational.


And for all you option traders............. You need to be in Amgen months ahead of the Denosumab! It should run up before the approval and run up more if approved, this is a blockbuster drug. 

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