Biotechnology analysts remain upbeat about Genetics InstituteInc.'s long-term prospects, despite last week's U.S. Court ofAppeals decision that invalidated GI's patent for erythropoietin(EPO). Interviews with five analysts revealed four bulls andone bear.

The decision, which meant the loss of the U.S. market for GI'sEPO, caused the company's stock to tumble 37 percent lastweek. It was "a major blow," said Robert Kupor of Kidder,Peabody in New York. "But the company is not in any wayfatally crippled."

The consensus among analysts is that GI can't do much tochange its overall strategy. The company's R&D pipeline "isextremely solid and potentially very lucrative," said MarkSimon of Robertson Stephens & Co. in San Francisco.

Simon expects the stock price, which closed at $39 on Friday, togo back above $60.

But Jim McCamant, editor of the Medical Technology StockLetter in Berkeley, Calif., and the pessimist of the group, said GIis over-priced, even at $40. He said the price doesn't reflect thedelay in FDA approval for GI's granulocyte macrophage colonystimulating factor (GM-CSF). The FDA already has approvedproducts by Amgen Inc. and Immunex Corp.

And the EPO decision has hurt GI's short-term potential. Kuporsaid he sees the company breaking even for 1991, but he haslowered his earnings-per-share estimate to 8 cents from 44cents. Simon has lowered his estimate from a loss of 25 cents toa loss of 70 cents, and Stone has swung from forecasting a 25-cent profit to a 60-cent loss.

Factor VIII, a blood-clotting protein, is one product that couldmove GI into the black. "This is the biggest plus they have,"said McCamant.

Stone said recombinant products like Factor VIII will displacethe $600 million to $700 million market for plasma-derivedproducts within four years. However, GI's licensee, BaxterHealthcare Corp., is three or four months behind Cutter Labs,which licensed Factor VIII from Genentech Inc.

GM-CSF could address a big market, but McCamant said GI'smarketing partners, Sandoz Ltd. and Schering-Plough Corp., willbe disadvantaged because Amgen and Immunex have a headstart. Margaret McGeorge of Sutro & Co. in San Francisco saidthis may not matter if GI's product is approved soon.

Another uncertainty is a U.S. Patent Office interferenceproceeding between GI and Immunex over the GM-CSF patent.

Stone is upbeat. "I expect Immunex will be the one with thepatent problem," he said. He said Schering teamed up with GIand Sandoz because GI has a better patent position.

Bone morphogenic protein is a wild card. Simon said BMP is amajor proprietary product for GI that is underappreciated byinvestors. Stone puts BMP's potential market at $500 million ayear. But McCamant said he doesn't think BMP will be animportant product because of competition from insulin-likegrowth factor and human growth hormone.

-- Karen Bernstein BioWorld Staff

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

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