Subject: SyStemix Stock Skids 28% on Criticism By Analyst Over Product Development 
Date: Published: 8/18/92 (84 lines)
Source: Wall Street Journal. Copyright Dow Jones & Co. Inc.

    Technology:
    SyStemix Stock Skids 28% on Criticism
    By Analyst Over Product Development
    ----
    By Jim Carlton
    Staff Reporter of The Wall Street Journal

    SyStemix Inc., a once high-flying biotechnology firm, lost 28% of
 its stock value yesterday when an analyst savaged the company for
 not developing its product line faster.
    The analyst, Stuart Weisbrod of Merrill Lynch & Co., downgraded
 the stock to below average from neutral after determining that it
 would take until 1996, two years longer than he forecast, for the
 concern to turn a profit.  Merrill Lynch underwrote SyStemix's
 initial public offering last year.
    After the downgrading, SyStemix's stock skidded $9.25 to close at
 $23.75 in national over-the-counter trading.  The stock approached
 its lowest point since the Palo Alto, Calif., company went public
 last August at about $19 a share.  As recently as January, SyStemix's
 shares hovered above $60.
    SyStemix has been hammered along with other biotechnology stocks
 this year.  The industry suffers from long and difficult product
 development cycles, compounded by regulatory snags.
    SyStemix's stock dive represents a coming down to earth for a
 company that had started spectacularly.  Under the guiding light of
 Stanford University's Dr. Irving Weissman, an immunology specialist,
 the company has developed several avantgarde technologies in gene
 therapy and related fields that could lead to new treatments for
 immune disorders, cancers and genetic diseases.
    In November 1991, SyStemix received a broad and fundamental
 patent covering purified bone marrow "stem cells," often called the
 grandfather of all human blood cells.  The following month, it was
 further buoyed when Swiss pharmaceutical giant Sandoz Ltd.  agreed to
 acquire 60% of SyStemix for $392 million, or an average of $65 a
 share, infusing vitally needed cash in an industry notorious for
 volatile stock prices and heavy spending on high-risk research.
 Under that agreement, Sandoz cannot boost its stock holdings for
 three years, after which it could acquire the rest of the company.
 After that announcement, SyStemix stock ballooned $19.75 in one day,
 to close at $53.
    But amid quarterly losses and weak revenue, the stock has fallen,
 in fits and starts, to its current level.  SyStemix posted a
 second-quarter net loss of $1.2 million, or 12 cents a share,
 compared with a net loss of $2.1 million, or 40 cents a share, a
 year earlier.  Revenue slumped to $131,000 from $364,000.  For the
 first half, SyStemix had a net loss of $15.9 million, or $1.75 a
 share, after taking a charge related to the Sandoz investment,
 compared with a net loss of $3.8 million, or 73 cents a share, a
 year ago.  Revenue fell to $207,000 from $969,000.
    In his research report, Mr. Weisbrod expressed concern about
 SyStemix falling behind schedule in almost all of its
 product-development projects, including the much-ballyhooed stem
 cell purification process.  Meanwhile, he wrote, development of
 competitors' products continue to move along.
    "At this point, we are losing confidence that the company has any
 viable products and we are beginning to believe that the company is
 simply becoming a basic R&D unit for Sandoz," he wrote.
    Mr. Weisbrod was not available to comment on which products were
 being delayed.  People in the industry, however, said SyStemix is
 having problems with its flagship SCID-hu mouse, a research animal
 endowed with a human immune system.  According to the sources,
 researchers are having difficulty infecting the mouse with the AIDS
 virus.
    Dr. Linda Sonntag, president and chief executive of SyStemix,
 would not comment on that.  She maintained that "all phases of
 product development are proceeding" and that the company is in a
 strong position in terms of cash and financial support.  "We are not
 at any risk whatsoever," Ms. Sonntag said, declining to predict
 future profitability.
    Ms. Sonntag said she previously announced that SyStemix was
 putting on hold its clinical trials of the stem cell process,
 pending "discussions" with the Food and Drug Administration.  But she
 said no product schedules have been changed.  "The fundamentals of
 the company are completely unchanged," she said.
    ---
    Marilyn Chase contributed to this article.

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