Recovery May Be in Maxygen's Genes

By no means do Internet stocks have a monopoly on acrophobia. Biotechs have also scaled the heights--only to plummet like stones. In the case of Maxygen, the reason for its lightning ascent, to 178 on Mar. 3, 2000, was elation over its "directed molecular breeding," which modifies genes for commercial uses. But when the market crumpled, Maxygen tumbled to 14--on Jan. 9, 2001. Now, however, there is fresh excitement over Maxygen, and the stock has edged up, to 18. With the rapid progress in genomics--such as the recent discovery that it may only take 30,000 genes, not 100,000 as previously estimated, to control human biology--Maxygen's technologies have become more attractive.

"Maxygen is using its proprietary technology to improve genes and proteins for commercial use in chemical, agricultural, and pharmaceutical products," says Jeffrey Zekauskas of J.P. Morgan Chase. He rates the stock a long-term buy, with a 12-month target of 30. Maxygen has teamed up with Pfizer and the National Cancer Institute in health care, with AstraZeneca and DuPont in agriculture, and with Chevron and Hercules in petrochemicals.

Any risk from Maxygen shares, says Zekauskas, is offset by a strong balance sheet, top-quality science, and "its potential attraction as an acquisition candidate to a global drug or chemical company capable of leveraging its technology."

May-Kin Ho of Goldman Sachs says that, with $266 million in cash reserves, Maxygen has enough for several years of operations. Maxygen will break even after 2005, predicts Ho. She expects each of its five partners to bring to market one Maxygen-based product, starting in 2003.

By Gene G. Marcial

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