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Published in U.S. 1 Newspaper on July 19, 2000. All rights


Biotech Forecast: Eric Schmidt

No matter what Wall Street’s mood of the moment, biotech

makes a good long term investment, at least partly because of its

relationship to pharmaceuticals, says Eric Schmidt, an analyst

at S.G. Cowen in Manhattan. "With biotech, we are not reinventing

the wheel but are capitalizing on a pharmaceutical sector that has

been extremely rewarding to investors for many years."

An alumnus of Penn, Class of 1990, Schmidt has a PhD in biochemistry

from MIT. He is on a "Life Sciences Market Outlook" panel

for the New Jersey Technology Council on Tuesday, July 25, at 4 p.m.

at 101 Carnegie Center. Peter Tombros, president of Enzon, will

moderate the panel, which also includes Thomas Tirney, of Neuberger

Berman, and Marshall Smith, an investment banker from Morgan

Stanley. Cost: $60. Call 732-980-4500, extension 4799 (

Investors are very comfortable with pharmaceuticals, Schmidt says.

"Overall it is a high margin business that serves an aging


Drugs are effective as opposed to other forms of health care, and

drugs have nice long patent lives."

"The same as we like the drug industry, we like the biotech


though clearly they are operating on a much smaller platform. If you,

as a biotech, step up to the plate and get the blockbuster drug, you

will have 5 to 10 years of healthy stock, but if you swing and miss

that first time at bat, your next 10 years will be pretty


The national biotech industry was worth $150 billion last year,


of 1,300 companies with about 350 products in clinical trials. Last

December analysts were dourly predicting that biotechs needed to


their resources by merging. This year biotechs have taken a more


position in the stock market and are much less likely to sell their

crown jewels to the big pharmas.

"Since December, 1999, there has been dramatic appreciation. The

biotechs are trading at higher multiples than the pharmas," says

Schmidt. Schmidt does not cover New Jersey area biotechs, but others

in his company have strong buy ratings on Pharmacopeia (

at Exit 8A and Enzon in Piscataway ( "The industry

went up 178

percent in the last 12 months, and most of the good stories are too

pricey for pharmas to buy."

But, he cautions, the risk/reward profile is very different for


and pharmaceuticals. "Certainly biotech is not suitable for all

types of investors."

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