Run-up in Celera stock suggests more to come

OUTLOOK

But one analyst warns of owning at this level

January 16, 2000|By Mara H. Gottfried

LAST WEEK, shares of PE Corp.-Celera Genomics Group rocketed after the Rockville-based genomics company announced that it had mapped 90 percent of the human genome and expected to complete the project this summer.

Since Celera began trading at $25 a share last April, its share price has gone up more than 700 percent.

It now trades above $200 a share, giving the company a market value of $5.5 billion even though it is expected to continue posting losses for the next few years. Is the rise in its share price warranted? What are investors banking on? Is this a case of irrational exuberance?

Eric T. Schmidt

Biotechnology analyst at New York-based SG Cowen Securities

The rise in the share price is warranted considering the heightened public interest in genomics. Celera's stock price hasn't risen significantly more than others with less promising prospects.

We believe that Celera will be the dominant provider of genomic information in the the long term.

Investors today aren't trying to invest in the companies for the revenues they're earning this year or next. They're looking to invest in the companies today that will dominate individual sectors within the genomics industry in the long run.

Therefore, I think Celera is a very solid investment.

I think there is a lot of exuberance in genomics, and perhaps Celera has benefited from that exuberance.

But I don't think it is to an unwieldly extent, and it is not more than other companies.

Winton G. Gibbons

Analyst at Chicago-based William Blair & Co.

If you look at Celera in relative value to other genomics stocks, it's fairly priced. I still think there's appreciation to be seen in this price.

00 They have a large market with attractive margins, and they're fulfilling a real need.

The pharmaceutical industry needs the type of information they're researching. I don't think it's irrational exuberance. It's very rational, actually. It just doesn't seem that way.

Laurence Blumberg

President of New York-based Blumberg Capital Management, which manages a life sciences hedge fund

Genomics companies are a long way from clearly demonstrating that there will be commercially interesting products developed from these platforms. There's a lot of speculation going on here that the platforms will produce the number of leads in a reasonable time frame that investors will want to see. I think people are a little ahead of themselves.

Celera is an essential theme in the industry. When the stock went up after they reported the imminent completion of the gene map, I kind of said, "So what?" I think it's that these stocks are priced for perfection.

I think I even overheard the management of PE Biosystems saying they thought the stock was overvalued when I was at the Chase H&Q [Life Sciences] Conference [in San Francisco last week].

I wouldn't be that harsh to say this is irrational exuberance. That would be saying there is no fundamental value here. But I would say that I wouldn't own Celera at this price. If it turns around, it could be pretty ugly.

A. Paul Boni

Research analyst at New York-based Punk Ziegel & Co.

I think Celera shares have risen because investors have really embraced the value of what's happening in the human genome project.

Celera is the catalyst for the acceleration of the project and people's understanding that this is going to happen very soon.

From that point of view, I think Celera deserves a lot of recognition from the investment community.

Even though Celera and the genomics companies have had dramatic run-ups in the stock market, their market capitalizations are still modest compared to other industry groups.

I don't think investors have in mind any specific revenue numbers. They're looking at this from more than a revenue point of view.

Celera is in a very strong position.

They've really assembled an all-star team and their goal is to provide the best information.

It's certainly a case of exuberance and I don't know if exuberance is ever rational.

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