WASHINGTON _ Anyone flipping through the pages ofThe Wall Street Journal or The New York Times on Aug. 9couldn't help but notice a nearly full-page advertisementproclaiming, "It's time to buy biotech." The ads wereplaced by the New York investment banking firm D. H.Blair & Co. Inc. and appear to express an embryonic butgrowing sentiment on Wall Street.It's a belief that biotechnology stocks have finally hitbottom with the ageless stock market wisdom, "buy low,sell high.""The biggest capital gains have historically happened wheneveryone else threw in the towel," D.H. Blair states in thead. "So what are gutsy investors faced with? Perhaps aonce-in-a-generation opportunity to go for the potentiallyimmense rewards that can come from what seems likedangerous risks.""Once the Congressional health care issue is resolved,which will finally occur in the next several weeks, webelieve there will be a major and long-overdue rally in thebiotech group," the ad continues. The ad claims that eventhe Clinton administration and congressional allies of itsoriginal Health Security Act don't believe that "costcontrols will be applied to new drugs."A phone number listed at the bottom of the ad connectscallers to D.H. Blair's vice chairman, Cal Renov, who wasout of the office on Friday. But his assistant told BioWorldthat the firm has received between 250 and 300 phone callsin the four days since placing the ad.Despite its call for gutsy investing, D.H. Blair offers an"aggressive buy recommendation" for mostly well-established biotechnology companies, namely Amgen Inc.,Genentech Inc., Biogen Inc., Chiron Corp. and GenzymeCorp. The only early-stage company stocks recommendedin the ad are Enzo Biochem, Advanced Tissue Sciences andInterneuron Pharmaceuticals (all three of which had initialpublic offerings (IPOs) managed or co-managed by D.H.Blair).Hambrecht & Quist biotechnology analyst Tim Wilson toldBioWorld that he found the ad "a little teary-eyed andBrave-New-Worldish" in places. (Sample: "Biotechnologyis at its very infancy. It has boundless potential, akin to theindustrial revolution to revolutionize human existence _by generating new, exciting, undreamed-of products.")Nevertheless, he said, "I absolutely agree with the premisethat they are bringing forward."Wilson said he's been saying the same thing for weeksnow. In a Hambrecht & Quist report dated July 25 andtitled "When is it safe to go back in the water?" Wilsonnoted the advice of financier Warren Buffet: be greedywhen others are fearful and fearful when others are greedy."What more can we say? Now is the time to buy," Wilsonwrote.Wilson said that while the industry has had a string of bonafide clinical trial disasters this year, Wall Street has oftenoverreacted due to its ignorance about the nuts and bolts ofthe drug development process. Drug development _ whatWilson calls a "black art" _ has become transparent in thebiotechnology industry.Wilson argued that large pharmaceutical companies havenever reported every stage of a drug's development soanalysts are unused to hearing about things such as failed orambiguous Phase II trials. As a result, data aremisinterpreted."Macro-events such as health care reform and risinginterest rates have also set a negative tone for evaluatingclinical data," said Wilson. But Wilson said that recently,the threat of health care reform has been almost entirelyeclipsed on Wall Street by fears about clinical trials. As aresult, he said, the sector needs some product successesbefore stocks will rally."Good news from Washington might help but we needsome drugs working and we need to get Wall Streeteducated about how to interpret clinical trial data _ whento worry and when not to worry," he said. He added thatpublic investors have been redeeming their mutual fundholdings in response to rising interest rates, a trend that willcontinue to shrink the capital pool available tobiotechnology companies.Robertson Stephens & Co. analyst Mark Simon said thatbiotechnology stocks have been oversold but doesn't agreethat this is the time to buy. "It may be time to buyselectively, but we have all the same product risks we'vehad for the last five years," Simon told BioWorld.Simon said the biotechnology sector traditionally enjoys apre-September rally due to anticipation about scientificconferences held in the Fall where key data is presented. Inaddition, he said that American Home Products' (AHP)$9.2 billion bid for American Cyanamid has renewedinterest in the pharmaceutical industry. It could also bodewell for biotechnology."If a mature drug company with an aging product line isworth $9.2 billion, what's an innovative biotechnologycompany worth? That's an interesting question to ponder,"he said.Evan Sturza, publisher of Sturza's Medical TechnologyStock Letter in New York, said that biotechnology stockshave risen roughly 8 percent in recent weeks. "The healthcare debate is prompting this rally to a certain extentbecause the price control issue is going in the rightdirection," he said. He added that pharmaceutical industrytakeovers such as the AHP-American Cyanamid deal "aretelling people there is hidden value here."But Sturza, who recommends both stocks to buy and stocksto sell short, said that health care reform will have little todo with biotechnology's long-term prospects. "Ultimately,the companies will have to stand on their own merits," hesaid. n

-- By Lisa Piercey Washington Editor

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