Investors trying to figure out when the bioscience sector willhit bottom may find some signals in the number of companiestrading at or near their cash values.

Using data provided by Smith Barney analyst Denise Gilbert,BioWorld calculated the cash multiple, based on Friday's closingprices, for the 22 companies on her list. The numbers werecalculated using cash levels as of Dec. 31.

In the 1987 sector downturn, said Gilbert, "the point at whichinvestors threw up their hands and said this is ridiculous wasat one- to two-times cash."

Gilbert recommends caution when bottom-fishing. "I wouldn'tsuggest people start buying all these companies," she said. Sherecommends hunting for bargains among companies whosefundamentals have been good all along. Her recommendationsare Agouron Pharmaceuticals Inc. and Cambridge NeuroScienceInc.

Other stocks on the list that are among analysts' picks includeCephalon Inc. and Protein Design Labs Inc., which are on Cowen& Co. analyst David Stone's list. Larry Bloom of Dillon Readpicks Regeneron Pharmaceuticals Inc. Linda Miller ofPaineWebber has Centocor Inc., Corvas International Inc.,Athena Neurosciences Inc. and ImmunoGen Inc. on her list ofspeculative buys. Michael King, a broker at Alex. Brown & SonsInc., thinks Chiron Corp. is attractive, with both products andscience. He also finds ImmuLogic Pharmaceutical Corp. andCambridge NeuroScience interesting, but isn't sure it's time tobuy anything yet.

Ultimately, though, said King, "if you buy 10 of these, you'llmake a lot of money on three, some money on another four andlose everything on the other three. But overall it'll be a nicepackage."

The sector still has room to decline significantly. Gilbertcalculates there's about 40 percent of downside left in thegroup. This would come from the remaining second- and third-tier companies that aren't yet down to two times cash or less.

"I would short any pre-IND development-stage company that'sselling for more than two times cash," said King. "This isn'twhat I want to happen, but what I feel will happen because ofinvestor sentiment."


The AMEX Biotechnology Index leveled last week to close at135.39, but is down 25 percent in April.

-- Karen Bernstein BioWorld Staff

(c) 1997 American Health Consultants. All rights reserved.