http://aidsinfobbs.org/articles/wallstj/88/280

Subject: Smaller Vaccine Firms Draw Attention Of Analysts

Date: Published: 9/6/88 97 lines

Source:  Wall Street Journal.  Copyright Dow Jones & Co. Inc. 

    OTC Focus:  

    Smaller Vaccine Firms Draw Attention

    Of Analysts, Who See Attractive Features

    ----  

    By Udayan Gupta

    Staff Reporter of The Wall Street Journal

    NEW YORK -- A French company's run last spring at

 Connaught Biosciences, one of the world's largest makers of

 vaccines, has sparked new interest in several smaller vaccine

 concerns.

    The vaccine makers -- which besides Toronto-based

 Connaught include Chiron, Praxis Biologics and Repligen, all

 of whose stocks trade on the Nasdaq National Market System -- 

 also have been troubled recently by increased liability costs

 and lack of skyrocketing growth to match high technology and

 other biotechnology companies.  (The two largest vaccine

 companies, Merck and American Cyanamid through its Lederle

 unit, trade on the New York Stock Exchange.)  

    "New laws which limit the liability of vaccine makers

 makes this a viable business again," says Mary Ellen

 McCarthy, who follows the industry for Shearson Lehman

 Hutton.  Moreover, she says that "rapid consolidation within

 the vaccine business has left the few remaining players in

 positions of near-monopoly."

    And despite its lack of spectacular growth, some analysts

 think the industry is attractive because of the steady demand

 for vaccines and the ability of the makers to raise prices

 without competitive challenges.  Also, they are encouraged by

 research into a promising hepatitis vaccine, several

 experimental AIDS vaccines and the general growing demand for

 treatments that prevent infectious diseases.

    Connaught, until July known as CDC Life Sciences, has seen

 its stock fall to 22 7/8 from 26 5/8 after France's Institut

 Merieux withdrew its offer in May because Canadian regulators

 ruled that the bid breached securities laws.  But industry

 analysts aren't ruling out a fresh bid this month from

 Institut Merieux and other new suitors.

    Andrew McCreath, an analyst with Burns Fry in Toronto,

 continues to be bullish on Connaught as a long-term

 investment.  It ranks third among vaccine makers in the U. S. 

 market and its most recent product, a meningitis vaccine,

 could add $90 million to its 1989 revenue if licensed by then

 in the U. S. Even though the stock is fully priced at its

 current level, it doesn't reflect some of the underlying

 assets such as $8 a share in cash set aside to satisfy

 potential liability awards, Mr. McCreath says.

    Chiron has a joint venture with Ciba-Geigy of Switzerland

 to develop and commercialize vaccines for a number of

 diseases, including hepatitis, malaria, herpes and AIDS. But

 its hepatitis vaccines hold out the most promise, says Viren

 Mehta, an analyst with S. G. Warburg.  Other analysts like

 Chiron's adjuvants, which heighten the body's response to

 vaccines.

    Chiron reported a loss of $11.2 million on revenue of

 $21.7 million in the year ended April 30, and some analysts

 expect the losses to continue till the end of 1990.  But Mr. 

 Mehta continues to be positive for the long term.

    Stuart Weisbrod of Prudential-Bache Securities isn't

 impressed by Chiron's research on the AIDS vaccine but finds

 the rest of its vaccine program attractive.  But, he contends,

 the company needs to raise new capital and attract a more

 seasoned management team.

    Both Praxis and Repligen represent higher risks for

 investors but the risks are already discounted in the stocks'

 current selling prices, says Linda Miller of PaineWebber.

 Praxis, which has had a 52-week high of 10 3/4, is now

 selling at 4 11/16.  Repligen has dropped to 6 1/2 after

 trading as high as 17 1/2 before the October crash.

    As a diversified vaccine maker, Praxis could be an

 attractive long-term investment if its new management can

 successfully commercialize the products it is working on,

 says Ms. McCarthy of Shearson Lehman.  Still, the company,

 which could launch three or four new vaccines within the next

 five years, might be considered cheap at these levels, she

 says.

    Praxis's vaccine to prevent meningitis, one of the first

 on the market, has been successfully marketed for more than

 18 months, says Kathy Behrens of Robertson, Colman &

 Stephens.  Now it is working on a version that can be

 administered to younger children.  In this arena, however,

 Praxis will face competition from others, Ms. Behrens warns.

    Repligen is using new DNA technology to develop an AIDS

 vaccine but like the others in the field it still has a long

 way to go.  It's the wild card in AIDS vaccines, says Ms. 

 Miller of PaineWebber.

[23 lines irrelevant to AIDS have been removed. -- sysop]

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