BUSINESSWEEK ONLINE : JULY 31, 2000 ISSUE
BUSINESSWEEK INVESTOR An Uncanny Eye for Pharma Finds (int'l edition) Fund pro Isaly can spot biotech gems big and small Sam Isaly has a bit of the venture capitalist in him. As the lead portfolio manager for Oppenheim Pharma/wHealth Fund, Isaly doesn't just invest in familiar, big-name pharmaceutical companies. He looks for promising biotech startups, too. As Isaly puts it, he's in the business of ''anticipating the anticipators.'' The strategy works. His $386 million fund gained 22.96% in the second quarter, making it the best performer of the 500 offshore funds that Standard & Poor's Micropal tracks for BUSINESS WEEK. The fund has a one-year return of 87.88% and a five-year average of 29.53%. Isaly is co-founder and managing partner at OrbiMed Advisors. He credits his strategy for giving him an edge over the competition. ''The private placements have been fantastic contributors,'' he says. Two stood out during the past three months: Orchid Biosciences and Praecis Pharmaceuticals, both of which listed on the New York Stock Exchange this spring and trade at more than three times their initial public offering prices. ''I propose that we've been smart about our private investments,'' says Isaly. ''But we could just be lucky.'' Indeed, since most biotech ventures fail, Isaly limits his private-equity investments to just 5% of the fund's assets. By law, he's allowed to invest 10%. Back in 1997, Isaly figured that Orchid would one day be able to capitalize on scientific work to map the human gene code. The company specializes in sorting out the extremely small differences in individuals' genes by testing different chemical reactions. Researchers can then use that information to develop personalized medicines, design clinical trials, even breed plants and animals. Isaly thinks Orchid's money-making potential is enormous. For now, though, it's still potential. Not that Isaly hasn't done well: He bought at an average of $5 a share; Orchid went public in May and is now trading at about $40. Praecis caught Isaly's eye because it has a prostate-cancer drug, Abarelix, that performed well in advanced clinical trials and is licensed to Amgen and France's Sanofi Synthelabs. Isaly bought Praecis in 1996 at $2.53 a share. It has risen to $33 since its April IPO. He expects it to be profitable within two years. If so, it will be one of only a few dozen biotech companies that actually make money. In 1997, only 10 did so. Isaly was also smart--or lucky--with Caliper Technologies, a company that has developed a lab-on-a-chip to rapidly screen new pharmaceuticals. In 1996, Isaly bought shares for $4. Caliper went public at the end of 1999 and is now trading at $50. Even at that price, Isaly thinks it's a good buy. Tularik, which specializes in gene regulation--making genes more or less active to control diseases--is another favorite. He calls it the leading post-genomics company and a bargain at just $30 a share. Still, Isaly relies on Big Pharma to provide steady returns of 12% to 15% a year. Some, such as Swiss giant Novartis, could do better. He's looking for a cumulative return of 50% to 100% from it in the next two years. Novartis has a new drug for diabetes that is awaiting approval from the Food & Drug Administration and is testing compounds for treating Alzheimer's and cancer. Novartis could introduce more new products by 2004 than any other company. Isaly also likes Eli Lilly because it has a drug for sepsis, or blood poisoning, that was approved by the FDA in late June and a drug for osteoporosis that has had successful late-stage human trials. And he recommends Japan's Eisai, which has developed drugs for Alzheimer's and ulcers. Isaly's big fear is ''pharma politics.'' Presidential candidate Al Gore has criticized Big Pharma over drug prices with the kind of rancor once reserved for tobacco companies. Chances are that the price of pharmaceuticals will have to be lowered no matter who wins. Still, Isaly says pharmaceutical companies will do well because ''there's more technology out there than the eye can see.'' By SUSAN BERFIELD _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS An Uncanny Eye for Pharma Finds (int'l edition) TABLE: Healthy Returns INTERACT E-Mail to Business Week Online

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