Forum Archive Index - May 2002

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Gerry and Others,
 
>
>
> Thanks, Nick and Snoopy,
> 
> I didn't even notice that Snoopy was talking about MMD while the
> subject supposed to be PTD ( MMD will never reach $50 Snoopy).
> 
>

Oops Gerry my mistake.  I have to admit to not following closely 
either MMD or PTD.  However, I don't think my mistake in confusing 
the two companies negates my general arguments regarding the risks of 
Biotech.

Specifically, on PTD I looked at the press release on the financial 
results put out on 14th December 2001.  An overall profit of $53.6 
million from a Biotech company is deeply impressive.  Of course one 
off payments have substantially influenced this result, and I see 
that royalty payments, which is what *I* regard as the core income 
for a biotech company, have only just started.

Looking further into the result and reading between the lines it 
seems as though the Ovuplant and pet contraception projects are still 
cash sinks.  Potential is there, yes, but more money is needed to 
develop these projects than they are currently generating.  I think 
the most telling statement in this financial report was:

"On-licensing of some products would be made when maximum value could
 be added to the products and their associated intellectual property, 
 but before the large capital outlays necessary for later stage       
 clinical trials are required."

In other words PDP doesn't have the cash resourcces to complete the 
job on its own.  Don't take this comment as myself putting my 
jackboots into PDP specifically.  Almost all biotech comnpanies face 
this problem.  I think back to an industry which faces similar 
hurdles, software funders like IT Capital.   Many bought into ITC on 
the potential of their crown jewel 'virtual spectator' and now that 
jewel has been sold.   What I am saying here, with this analogy, is 
that there is no guarantee that PDPs patents and sterling work will 
translate to a cash generating product.   Furthermore if a product is 
successful there is no guarantee that the PDP shareholders will be 
the ones who benefit (analagous to the IT capital example).

With the correction on the specifics, my statement that TA may be 
more useful in analysing the valuations of a Biotech company rather 
than fundamentals that are probabilistic, with no established cash 
flow stream to go on, and difficult to analyse.  

SNOOPY







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Message posted by Harry Tennyson
 using Pegasus Mail 2.55
I have Word 97 to read attachments
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