A Five-Pack of Biotech Specs

04/04/2003 12:00 am EST


George Gilder

Founder and President, Gilder Publishing, LLC

Few advisors have built as strong a reputation in the technology field as George Gilder, editor of The Gilder Technology Report. Perhaps less known to our readers is the talents of both himself and his research team in the biotechnology area. Here, in a Gilder supplement to his service called the Technology Market Letter, co-edited with Andrew Redleaf and Richard Vigilante, the team picks a package of five high-risk, high-return biotechs for long-term investors.


“We suggest buying a shopping basket of five underpriced biotechnology stocks based on the chance that one or more would have a drug breakthrough in the next couple of years and hence become euphorically valued by the market. It is for this reason that we suggest buying these stocks solely as a package as some may go nowhere and some may prove very rewarding. These stocks are all selling at deep discounts and in each case we see the more recent price declines as market driven, and not company specific.  Overall, we are very enthusiastic about this group of issues.


Human Genome Sciences (HGSI NASDAQ) is trading at between 60%-70% of its replacement value. The company has almost $800 million in net cash and more than 20 clinical or preclinical trails in place. The firm recently received a milestone payment  based on progress on a Glaxo drug using HGSI intellectual property.


Cell Genesys (CEGE NASDAQ) is trading at about 70% of replacement value, with 15 clinical trials running for their three main cancer platforms and are on the verge of entering phase three for their GVAX platform. Granted, it would be nice if they had a bit more cash, and they may have to go to the capital markets to get it next year or later this year.  Nevertheless, the company’s drugs still have billion-dollar potential.


Millennium Pharmaceuticals (MLNM NASDAQ) has released a study that showed that a combination of its current cash cow Integrilin and the Medicine Co.’s Angiomax is superior for preventing blood clots after angioplasty. Heparin has been used for decades.


Maxim (MAXM ) has a market capitalization of around $75 million. It is trading at less than net cash; it is still essentially a one-drug company, and that drug, Ceplene, still appears to be promising results in phase three cancer trials. MAXM is still losing about $10 million a quarter and it could still use some more capital.


Vertex (VRTX NASDAQ), trading at a market cap of about $900 million is still below its estimated replacement value of about $1 billion. Meanwhile, the company is in phase three trials of an AIDS drug known as 908m which the company is developing with Glaxo.  According to the companies, they say the drug provides a clear superiority  in results over current therapy, especially for very sick patients.”

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