Subject: Smaller Vaccine Firms Draw Attention Of Analysts
Date: Published: 9/6/88 97 lines
Source:  Wall Street Journal.  Copyright Dow Jones & Co. Inc. 

    OTC Focus:  
    Smaller Vaccine Firms Draw Attention
    Of Analysts, Who See Attractive Features
    ----  
    By Udayan Gupta
    Staff Reporter of The Wall Street Journal

    NEW YORK -- A French company's run last spring at
 Connaught Biosciences, one of the world's largest makers of
 vaccines, has sparked new interest in several smaller vaccine
 concerns.
    The vaccine makers -- which besides Toronto-based
 Connaught include Chiron, Praxis Biologics and Repligen, all
 of whose stocks trade on the Nasdaq National Market System -- 
 also have been troubled recently by increased liability costs
 and lack of skyrocketing growth to match high technology and
 other biotechnology companies.  (The two largest vaccine
 companies, Merck and American Cyanamid through its Lederle
 unit, trade on the New York Stock Exchange.)  
    "New laws which limit the liability of vaccine makers
 makes this a viable business again," says Mary Ellen
 McCarthy, who follows the industry for Shearson Lehman
 Hutton.  Moreover, she says that "rapid consolidation within
 the vaccine business has left the few remaining players in
 positions of near-monopoly."
    And despite its lack of spectacular growth, some analysts
 think the industry is attractive because of the steady demand
 for vaccines and the ability of the makers to raise prices
 without competitive challenges.  Also, they are encouraged by
 research into a promising hepatitis vaccine, several
 experimental AIDS vaccines and the general growing demand for
 treatments that prevent infectious diseases.
    Connaught, until July known as CDC Life Sciences, has seen
 its stock fall to 22 7/8 from 26 5/8 after France's Institut
 Merieux withdrew its offer in May because Canadian regulators
 ruled that the bid breached securities laws.  But industry
 analysts aren't ruling out a fresh bid this month from
 Institut Merieux and other new suitors.
    Andrew McCreath, an analyst with Burns Fry in Toronto,
 continues to be bullish on Connaught as a long-term
 investment.  It ranks third among vaccine makers in the U. S. 
 market and its most recent product, a meningitis vaccine,
 could add $90 million to its 1989 revenue if licensed by then
 in the U. S. Even though the stock is fully priced at its
 current level, it doesn't reflect some of the underlying
 assets such as $8 a share in cash set aside to satisfy
 potential liability awards, Mr. McCreath says.
    Chiron has a joint venture with Ciba-Geigy of Switzerland
 to develop and commercialize vaccines for a number of
 diseases, including hepatitis, malaria, herpes and AIDS. But
 its hepatitis vaccines hold out the most promise, says Viren
 Mehta, an analyst with S. G. Warburg.  Other analysts like
 Chiron's adjuvants, which heighten the body's response to
 vaccines.
    Chiron reported a loss of $11.2 million on revenue of
 $21.7 million in the year ended April 30, and some analysts
 expect the losses to continue till the end of 1990.  But Mr. 
 Mehta continues to be positive for the long term.
    Stuart Weisbrod of Prudential-Bache Securities isn't
 impressed by Chiron's research on the AIDS vaccine but finds
 the rest of its vaccine program attractive.  But, he contends,
 the company needs to raise new capital and attract a more
 seasoned management team.
    Both Praxis and Repligen represent higher risks for
 investors but the risks are already discounted in the stocks'
 current selling prices, says Linda Miller of PaineWebber.
 Praxis, which has had a 52-week high of 10 3/4, is now
 selling at 4 11/16.  Repligen has dropped to 6 1/2 after
 trading as high as 17 1/2 before the October crash.
    As a diversified vaccine maker, Praxis could be an
 attractive long-term investment if its new management can
 successfully commercialize the products it is working on,
 says Ms. McCarthy of Shearson Lehman.  Still, the company,
 which could launch three or four new vaccines within the next
 five years, might be considered cheap at these levels, she
 says.
    Praxis's vaccine to prevent meningitis, one of the first
 on the market, has been successfully marketed for more than
 18 months, says Kathy Behrens of Robertson, Colman &
 Stephens.  Now it is working on a version that can be
 administered to younger children.  In this arena, however,
 Praxis will face competition from others, Ms. Behrens warns.
    Repligen is using new DNA technology to develop an AIDS
 vaccine but like the others in the field it still has a long
 way to go.  It's the wild card in AIDS vaccines, says Ms. 
 Miller of PaineWebber.

[23 lines irrelevant to AIDS have been removed. -- sysop]

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