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Published in U.S. 1 Newspaper on July 19, 2000. All rights
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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 (www.njtc.org).
Investors are very comfortable with pharmaceuticals, Schmidt says.
“Overall it is a high margin business that serves an aging
population.
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
industry,
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
painful.”
The national biotech industry was worth $150 billion last year,
consisting
of 1,300 companies with about 350 products in clinical trials. Last
December analysts were dourly predicting that biotechs needed to
conserve
their resources by merging. This year biotechs have taken a more
favorable
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 (www.pcop.com)
at Exit 8A and Enzon in Piscataway (www.enzon.com). “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
biotechs
and pharmaceuticals. “Certainly biotech is not suitable for all
types of investors.”
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