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BioTech Navigator Investment Newsletter - 1 00 News (Page 16)

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BioTech Navigator Investment Newsletter - 1 00 News
Pharmaceuticals Inc. (ALXN) and
Progenics (PGNX), for the simple rea-
son that these two technologies are
coming of age in 2000 and beyond.
One that has done well is Cephalon
(CEPH). Cephalon has an approved
drug called Provigil, which was re-
cently approved by the Food and Drug
Administration (FDA) for what's
called narcolepsy. It's basically a non-
narcotic stimulant, something of an
amphetamine or Ritalin, but with a
much, much safer profile. It's cur-
rently being used about 30% of the
time in non-approved indications or
off-label indications, including sleep
apnea. It's also being used in some of
the diseases associated with neuro-
logical disorders where you become
fatigued, like multiple sclerosis or
For the new millenium, we believe
that biotech is poised to commence a
period of unprecedented growth for
the next five to 10 years. Some of
drivers expected to fuel the growth
include: 1) completion of the genome
project, which should generate an un-
precedented amount of novel targets
for therapeutic intervention; 2) the
market's pressing need for novel
therapeutics to treat unmet needs; 3)
an expanded FDA that is more re-
sponsive and quicker to review prod-
ucts; and 4) smarter management
teams focusing on just the areas they
think offer the greatest likelihood for
So, where should investors go for
2000 and beyond?
The biotech industry is now more
than a decade old and hopefully more
mature. Historically, pivotal trial re-
sults and new product introductions
have been key drivers to the valua-
tions of biotechs. The past will help
predict the future especially as we en-
ter the richest period of time in terms
of new product rollouts. The new
millenium will usher in new technol-
ogy platforms especially in genomics,
combined with advanced computer
technology that will help further ad-
vance the progress in biomedical re-
Fortunately, we are experiencing
research advances that have increased
the life expectancy and greatly im-
proved the quality of life for the gray-
ing of America and at the same time
reducing healthcare costs. According
to a study that tracked Medicare bene-
ficiaries from 1982 to 1994, the dis-
ability rate among the elderly declined
14.5 percent. Better drug treatments
for osteoporosis, stroke, Parkinson's
disease, congestive heart failure and
other diseases were a key factor. The
substantial investment in research on
the part of pharmaceutical compa-
nies - $24 billion in 1999 alone ­
promises even more breakthroughs.
Companies such as Geron (GERN)
whose research may help slow down
the process of aging with their war
chest of patents are the leader in their
With the aging of the baby boom-
ers, I think that investor psychology
will shift. Medicare reform coupled
with patent expirations will provide
excellent investment opportunities in
2000. Implications of Medicare re-
form and pending patent expirations,
which have been perceived as long-
term negatives for the large innovator
pharmaceutical companies throughout
1999, should be viewed positively for
generic companies. Shares of Forest
(FRX), Teva (TEVA), IVAX (IVX),
and Watson (WPI), in our opinion,
are the most likely beneficiaries, par-
ticularly the first three given that ge-
nerics still represent a large part of
their businesses. While Watson may
also benefit from the psychology shift,
its high-growth brand business and
the resolution of certain company-
specific issues will likely be the key
drivers of the stock in 2000.
Then there are the specialty ge-
neric companies such as SangStat
(SANG), SuperGen (SUPG) and Se-
pracor (SEPR). SangStat markets a
generic cyclosporine for transplant
patients. Lately, the stock has done
well and we see this positive trend to
continue with a great upside in poten-
tial earnings especially since it de-
feated Novartis in a legal battle. Su-
perGen specializes in oncology with
products soon to come to market
while Sepracor seeks to improve exist-
ing popular drugs that are nearing
their patented life. BTN expects both
companies to do well.
Expect the completion of the Hu-
man Genome Project, a global initia-
tive to map and sequence the whole
human genome by the year 2003 to be
the driving force of modern medicine
in the new millennium. Biotech com-
panies focusing on bioinformatics and
functional genomic companies will
develop a new mindset for under-
standing and treating disease. By se-
quencing specific regions of individ-
ual genes from a patient, they will be
better able to understand our individ-
ual propensity for disease, the likeli-
hood that we'll develop disease or not,
and whether we will react favorably or
adversely to drug treatment. Current
estimates indicate that the best drugs
only work on about 60% of the popu-
lation and it's not unusual for a drug
to only work on one out of three peo-
ple effectively. Differences in re-
sponse to therapy are largely due to
the minor differences in the spelling
of the different genes. So by increas-
ing our understanding of the genetic
code, doctors will be better able to
tailor drugs for patients that they
know will work in their system and
actually treat their diseases.
Beware however, of promises of
BioTech Sage Report, January 2000
Biotech 2000
Continued from page 5, column 3
Turn to page 17, column 1

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