Bio Tech Investment Ideas
This page was Written in 1996. Useful for background, but needs follow up. I will add the follow up sometime in the summer of 1998.. Here are a few investment themes we are following: (1) Some of the Biotech companies will produce block buster drugs, (2) Some will collect and provide proprietary Biological information which will produce great income streams and could spawn future Pharmaceutical companies, (3)Some companies have unique niche markets.
A group of bioinformatics companies include: (1) Human Genome Sciences (2) Incyte (3) Sequana Theraputics and (4) Genome Therapeutics. These companies are decoding the DNA sequences for the Human Genome and other important biological items,(ie, Hgsi has the sequence of the genome of the bacterium Staphylococcus aureus). These companies will have decoded and applied for patents for almost all the important DNA sequences for the Human, and are developing the relationships between disease and genetic coding. The theory being, that you can alter the disease process by altering the genetic coding of certain genes.
Other companies are developing ways of injecting or altering genes in the body to produce the desired results. These companies are in the gene therapy business. Vical, Targeted Genetics and Somatix. Vical has demonstrated a way of injecting stuff into a tumor, changing the tumor's genetic makeup allowing the body to identify it as a foreign material. The immune system then goes into action and kills the tumor. In one case all similar tumors in the body were killed.
Some companies are developing drugs using antisense methods. Isis Pharmaceutical and Genta.
Other companies are developing computer simulations that allow them to test the effects of various therapies against known diseases. One company Agouron Pharmaceutical has developed a very important drug that within the last few months has proven to be able to dramatically reduce the HIV virus replication process. They are getting great results in trials. Two companies will beat them to market with similar drugs, but their drug has minimal side effects. They also have identified the coordinates of the common cold virus. Another company using these methods for drug discovery is Vertex Pharm.. They expect to have the next generation HIV protease inhibitor on the market by 2000.
Other companies are in particular niche markets. Ribozyme(5/10/96), ISLS, now Escalon. Both are very interesting. Intelligent laser has developed a technology that can alter your sight by adjusting your lenses using an extremely short laser pulse. It is a much better technology than present ones because it can do the job without hurting other portions of your eye. Still others are working with specific proteins to attack disease. Amylin(diabetes),Cytel (inflammation) NPPS Pharmaceuticals (one receptor), and another company IDEC which has developed a large manufacturing capability for new drugs and has a block buster drug with Genentech.
There is so much going on, it is hard to guess which companies will produce the best returns. I have selected about 10 companies from a long list of hundreds of Biotech companies that should do well. I have mostly followed the thinking and advice of the California Technology Stock Letter. I plan to hold these stocks for at least 10 years unless there is compelling reasons to sell them.
Keep in mind these are very small companies that will encounter many adverse and exciting events which will make them extremely volatile investments. Up and down 2 to 3 fold during a year. Also, these companies are below the radar screens of major mutual funds. They do not have a market value large enough to provide liquidity for mutual funds. Eventually they will reach that level and buying from mutual funds could start driving the stocks.
1995--1996---
During an up and down stock market, one buying strategy would be to set
a buy price somewhere around 20% below the 25 day moving average, once
the stock crosses below the moving average, and place a buy order for up
to 60 days at that price. Also Wall Street has a tendency to over react
and can either pump up a stock beyond all reason, (a good sell opportunity)
or beat a stock price into the ground, (a good buy opportunity). In an
up market like the current market, it will be very hard to buy these
stocks at good prices. You might want to dollar cost average during this
time period, with half the amount you intend to investment, and when we
get a correction, or if Wall Street gets negative on a particular stock
you could double up your buying. The potential is very exciting, but don't
chase these stocks. Through patient buying you can gain over a 20% buy
price advantage over other methods.
April 1997: Good opportunities but the market is almost showing a terible
bear beginning. I would wait until the large caps shake out. Maybe by August or
September 1997.
June 1998: My biotech portfolio includes the following. The % is the proportion of
my biotech portfolio.
Agouron Pharm.(agph) 61%, Vical (vicl) 22%, Ribozyme( rzym) 11%, IDEC (idph) 6%.
The Target 2-5 year price for the stocks is just hot air, but it is a goal that you could aim at, and if reached, you might want to re-evaluate your position and objectives.
I hope these ideas will give some support and encouragement to invest in companies that have great growth potential. If only 2 to 3 of these companies make it, you will have done very well.