Knobias ClipReport (8-17-2007)

Submitted from Knobias ClipReport

The overall market looked weak again as more signs of trouble in the housing, mortgage, and credit industries surfaced. Countrywide Financial noted that they were tapping into an $11.5 billion line of credit to shore up its business. Global markets also took hits as worldwide concerns of credit have spread. The Commerce Department reported housing starts fell by 6.1% to a seasonally adjusted 1.381 million annual rate, a ten year low. The lowered permits show that mortgage financing is becoming more difficult to procure for consumers and that the population is seeing a decrease in existing home prices leaving those with the financing believing existing homes were bargains versus new homes.

Remarkably, the markets were down almost 350 points before rallying the last hour and ending the day in the green. For the technical analysts, a doji dragon fly pattern appeared on the Dow’s 200 day moving average. The pattern, which is a fairly reliable bullish signal, could signify a bottom, but with the massive amount of short term negativity, it remains to be seen.

With the huge amount of volatility and negativity still in the market, safer bets could be on the minds of traders and what’s safer than a name trading at cash?

Well, with the recent decline in the dollar, interest rates declining, inflation still being a concern, cash may not even be safe, but some funds have to have equity positions, and other investors buying for the long haul could care less what’s safe now as opposed to 30 years down the road. Needless to say, there’s still going to be buying and the buying will most likely be less speculative in nature.

Though biopharmaceuticals are and have been fairly speculative, bio’s trading at cash are much less risky, especially with pipelines chock full of prospects. While the bio buzz was only a few months ago, profit taking has left many of the names at extremely low levels relative to their liquid asset values.

Names such as Renovis, Telik, Pharmacyclics, Idenix, Gene Logic, Hollis-Eden, and Threshold are down from April and trading near record lows and cash/liquid asset levels.

Renovis Inc. (RNVS) has a market cap of $89 million with $91.7 million in current assets. The Company is researching neurological and inflammatory disease with 5 preclinical candidates. Telik Inc. (TELK) has a market cap of $140 million with $114 million in current assets. The Company has a cancer drug in Phase III and one in Phase II of testing along with a host of others in preclinical research. Pharcaclyclics (PCYC) has a market cap of $53.5 million and current assets of $40 million. The Company has a Phase II candidate for non-small cell lung cancer, non Hodgkin’s lymphoma, and glioblastoma. Idenix Pharmaceuticals (IDIX) has a market cap of $156 million and $135 million in current assets. The Company also has $44.5 million in non current restricted cash and marketable securities. Their pipeline includes a hepatitis B candidate in Phase II/III, hepatitis C candidates in preclinical and Phase I stages as well as an HIV candidate in Phase I testing, not to mention the Company’s hepatitis B drug, Tyzeka, which is already on the market. Hollis Eden trades at $43 million in market cap but has $52.17 million in cash. By the end of the year, the Company expects to have two Phase I/II clinical trials underway with HE3286 in the treatment of metabolic disorders and inflammatory conditions which is expected to be followed in early 2008 with an IND filing for HE3235 in cancer. Threshold Pharmaceuticals (THLD) has a market cap of $26.5 million and total current assets of $35.7 million. In the pipeline the Company has Glufosfamide in Phase II testing for pancreatic, ovarian, small cell lung cancer and sarcoma. In Phase I is Deoxyglucose for solid tumors as well as two other candidates in the research and preclinical phases. Gene Logic (GLGC) has a market cap of $38.4 million with current assets of $44 million. The Company isn’t a true biopharm but does involve itself in the industry. The Company has recently announced the reduction of expenses in its genomics division and is exploring the sale of its assets while focusing on the drug repositioning division which identifies and develops new and expanded uses for discontinued lines.

In any event, the speculative nature and risk involved with pharmaceuticals was very high when the names received attention due to various conferences earlier in the year. With the names trading lower to cash and liquid asset levels, the speculation and risk become extremely lower. With safe havens for money on the minds of many in the market, these names could be something to follow. Investors would be wise to watch.




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