June 30th 2004: This alert will address a few timely questions from readers. The first question is a about the plunging stock price of Rigel (RIGL). Please review my last alert on Rigel in the archive. Basically the most recent plunge yesterday followed a stock distribution by MPM Capital (a large investment fund that led a prior round). The fund still owns about 10% of Rigel. The sales yesterday most likely followed a distribution to shareholders who then turned around and sold their stock. This is par for the course when a fund like MPM distributes shares. The recent sell-off is a function of profit taking by the large institutions that have made huge gains. As far as I know there is no knowledge floating around as to the results of the recent allergy trial. Rigel will be announcing results from the "Park" allergy study probably in early August. My last recommendation (see alert) was to sell part of a position in front of this announcement since I have no way to handicap the results. In the case of Rigel I have a founders position and have not sold my stock except for one minor trade but this is not what I recommended for other investors. I happen to think that Rigel has a number of very promising programs and they will be in clinical trials in three of them by the end of this year with another promising oral cancer program (Aurora kinase inhibitor) in the preclinical stage. We will also see some of early clinical trial results of their hepatitis C inhibitor this year. If the Park study turns out positive the current price will be a bargain-if negative the stock may trade down. The current market cap (at a stock price of $13.41) is about $241 million (not fully diluted) with $97 million cash as of 3/31/04. The current technology valuation is therefore about $144 million. I doubt the technology valuation will drop below $100 million because of RIGL's other advanced programs. Given these assumptions my calculation says that RIGL could drop to about $11/share if the Park study is entirely negative. The upside would be about $26/share if the study is clearly positive. Therefore my conclusion is that at current levels the upside potential is much greater than the downside.

I was also asked to comment on Genaera (GENR) and Praecis (PRCS). See alerts for my thinking on both of these stocks. Nothing has really changed for PRCS-I still don't see US sales of Plenaxis hitting 10% of the market, which was their prediction. The FDA's narrow indications and the reluctance of urologists to take on any extra risk (allergic reactions) make off-label use unlikely. The economic incentive is just not great enough. As for GENR-I still like them. Finding treatments for wet AMD (age related macular degeneration-a leading cause of blindness in the US) is very competitive with Merck just entering the field using RNAi technology (from Alnylam--ALNY). Also Alcon expects to launch a product in '05. What I like about GENR is that they have the potential to treat both eyes at the same time using an intravenous injection. This avoids all the side effect problems of injections directly into the eye (intravitreous). Almost all the other companies going after this market are administering their drugs through intravitreous injections. Investors will need to wait for Phase II data for further real appreciation-hopefully we will see some interim results by year-end.

As a matter of disclosure I want all readers to know that I own many of the stocks I write about in my personal account and always maintain a long position. I am not a stock broker or a registered investment adviser.  I also write about some of these stocks in alerts for BioPortfolio, which can be found at www.bioportfolio.com . Biotech Insight is a  web-based newsletter published and archived at www.biotechinsight.com. Alerts and newsletters are sent electronically to subscribers.  The following is further disclosure: Dr. Garren is an advisor to two funds investing in biotechnology. I recommend many of these same stocks to the investment funds mentioned above. It should be noted that certain funds go both long and short. The information in this column under no circumstances serves as a recommendation to buy or sell stocks. Please also see the disclosure about Biotech Insight archived on BioPortfolio.

Ron Garren MD
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Ronald Garren, the editor of Biotech Insight is a member of Biotech Insight Management, LLC, a California registered investment adviser and the general partner of a hedge fund that invests in biotechnology companies, including some of the companies discussed in this newsletter. Garren also consults for both a second large hedge fund focused on the healthcare industry with a heavy emphasis on biotech and InvestBio an investment and information devision of  Diversified  Biotech Group Investments of NYC. Many of the stocks discussed in the newsletter and alerts are also included in the hedge funds, recommended for investment to InvestBio (Diversified Biotech Group Inc. a subsidiary of InvestPrivate Inc.)and owned personally by Ronald Garren.