A Biotech Stock For The Strong Of Heart

For a biotech company that's developing and marketing products to treat cancer and autoimmune diseases, Immunex has been an investor's nightmare: It collapsed from a high of 68 a share in January to as low as 24 in late April. The stock has since edged up, slowly, to 34. But for the strong of heart, Immunex will be a gigantic winner, insist some pros.

"Except for the market's current distaste for biotechs, there is everything to like in Immunex, especially now that its legal wrangling with Hoechst has ended," argues money manager Joan Lappin, president of Gramercy Capital Management. She says the Street has "underappreciated" the rapprochement between Immunex and Hoechst, the giant German chemical company.

The two companies withdrew on July 23 their respective lawsuits against each other over GM-CSF, or granulocyte macrophage-colony stimulating factor, a new white-blood-cell stimulant that they jointly developed. It was approved by the FDA in March, 1991.

FREE VIALS. GM-CSF is marketed in the U.S. by Immunex as Leukine and by Hoechst as Prokine. But in a suit filed in April, Immunex accused Hoechst of "dumping" Prokine by sending free vials to Immunex' important customers. Hoechst countersued. The subsequent out-of-court settlement was "rather mind-boggling for a small company like Immunex," says Lappin. She figures that Immunex received a value of at least $80 million, or $5 a share, from the settlement. The stock over the short term, she says, is worth 50.

The key issue, says Lappin, was Hoechst's giving Immunex exclusive U.S. marketing rights to GM-CSF. It's now likely, she says, that Immunex' Leukine sales will balloon from 1992's estimated $30 million to $50 million in 1993, $75 million in 1994, and $100 million in 1995. She expects that broader uses of Leukine, now used only to facilitate bone-marrow transplants, will be approved by the FDA next year.

Hoechst also agreed to give Immunex the foreign marketing rights to TNF, or tumor necrosis factor receptor, used to treat septic shock. Hoechst also turned over its rights to sell GM-CSF in Japan and to relinquish all claims to Immunex' PIXY321, described by analysts as its blockbuster drug for 1995. In return, Immunex will pay Hoechst $8 million to $10 million.

Merrill Lynch analyst Stu Weisbrod rates Immunex a long-term buy based on its "superior long-term-product portfolio" and its recently "solidified cancer therapy franchise." He says Immunex' products, including PIXY321, a second-generation GM-CSF, "put Immunex in the same position that Amgen was in in the late 1980s."

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