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Biogen Idec Inc. Message Board

  • sonsofatreus sonsofatreus Mar 3, 2004 9:00 AM Flag

    Is Eln a better buy! Read On.

    Prior to the antegren announcement, ELN closed at $8.80, and BIIB closed at 44.26. It has been well reported on this board (but not much elsewhere) that the subsequent rise of both companies, if attributed to antegren news alone, was disproportionate. Without repeating the calculations, here are some numbers.

    Date____________PPS Diff______Imp Eln pps
    18-Feb-04________4.63____________16.43
    19-Feb-04________7.91____________21.24
    20-Feb-04________6.68____________19.53
    23-Feb-04________5.03____________18.53
    24-Feb-04________4.79____________17.96
    25-Feb-04________4.91____________17.73
    26-Feb-04________4.74____________18.49
    27-Feb-04________3.90____________18.32
    01-Mar-04_______3.97_____________18.88
    02-Mar-04_______3.19_____________20.19

    PPS DIFF is the difference in market cap rise (eln vs biib) expressed in $/eln share. Adding this difference to ELNs closing price on that day yields the implied price that eln �should� be. Note that the pps difference has dropped much more than the implied eln price. Since the close on Feb 19, the PPS DIFF has dropped 60%, but the Implied Eln PPS has only dropped 5%. The market is closing the gap. Could Eln go to $20 this week? Yes.

    Now, lets take this analysis one step further. I got the following from another post. It was attributed to Merrill Lynch:

    "...we believe that Antegren is the key driver of future growth. Based on an earlier than expected FDA filing of Antegren in MS, we believe that phase III results are highly positive. We expect approval in 1H05 with peak sales of $1.8 bil. Reiterate Buy and $69
    price objective."

    NOW, if we use the $69 target and do the same calculation as above:

    ML Target_______12.85____________29.85

    Could Eln go to $30/share near term? You bet! I am.

    As always, my opinion, make up your own mind.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • I have recommended your post, and I cannot disagree with it. My point is not that everyone owning biib should dump it and buy elan. but if you don't own eln, and you do own biib, then it really does not make sense not to invest in eln, and for much of the same reason that you currently own biib. OR, if, for example, biib was your only biotech, you may want to take some out of biib and put it in eln in order to get greater leverage from your total biotech investment.

      Anyway, been an interesting dialog, and I appreciate it.

    • Meant to say, "ELN probably has more upside potential from this point; BIIB probably has less downside risk."

    • What I am objecting to are comparisons leading to the conclusion that on some sort of objective basis ELN must be a better buy than BIIB. ELN probably has more upside potential from this point; BIIB probably has less downside reward. If you think Antegren is going to be a great product, and that ELN has put all its previous problems behind it, you should probably buy both. Not sell one to buy the other. Experienced investors typically hedge against being wrong - balancing risk and reward.

    • As eln is correcting today, I think perhaps some have missed the point. The day prior to antegren approval, you must assume that all things are priced in to both stocks. Most of the rise in each stock since that time, then, is due primarily to antegren. Since each company owns antegren 50%, and since eln wont cannabalize any existing profit, you would expect the market cap of each stock to rise an equal amount. As the market rationalizes this differnece, eln should rise in market cap relative to BIIB.

      Another way to look at it, you can "buy" antegren cheaper by buying eln. BIIB may increase in value by 25% from here, but eln is an easy double from here based on the same drug - antegren.

    • Sonsofatreus,

      I could not agree with you MORE. ELAN is EXTREMELY undervalued at these levels still.

      Elan = the stock of a lifetime.

      Biib is also a very good company, with half of Antegren but ELAN at these levels... STELLAR.

      My humble opinion.

 
BIIB
329.99+2.41(+0.74%)Sep 18 4:00 PMEDT

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