Monday, August 22, 2005

The Bottom Line: One Hit Wonders

The EYET acquisition by OSI Pharma today reminds us that, yes, one hit wonder stocks can and will make you money.

As Big Pharma battles with litigation and the onslaught of generic drugs, the best bet for investors in the industry remains with these small biotech companies burning through cash but also creating some of the most marvellous drugs of our time.

Last week, Myogen (no analyst coverage) said that Phase IIb clinical data for darusentan had shown the drug to be effective in treating patients with hypertension (which afflicts one billion people worldwide).

So forget cash burn rate.

Forget about dividends.

Value and growth are just 2 sides of the same coin anyways.

Ditch your consumer cyclicals -- we're in defense mode, baby.

Buy small biotechs because as the MRK scandal demonstrated this weekend, at least the former aren't killing patients.

Buy biotechs because now they're buying each other out instead of waiting for Big Pharma juggernauts to serenade them.

And that's today's bottom line.

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