We have two themes to today's Rule Breaker column: common sense and relevance. Succinctly, today I'll attempt to share some of each quality on three topics: the stock market's decline, Celera (NYSE: CRA), and Amgen (Nasdaq: AMGN).
First topic: the market's decline -- how long will it last!?
Common sense tells us that the decline is temporary. Common sense also tells us that if the economy is slowing too much, Greenspan and the Federal Reserve will notice the problem and will not continue to raise interest rates. They'll either hold rates steady or lower them. When Greenspan hinted at this very possibility this week, stocks soared for one day. Until Greenspan spoke, however, few people vocally considered the possibility of lower interest rates. Why not? Isn't it common sense? The Fed will sidestep a recession however possible. They'll lower interest rates. It may or may not work, but they will take action, and stocks usually do better when interest rates decline.
That's some common sense. Now, some relevance.
Which is more relevant to your investing career: value today, or value three years from now? If your answer is "three years from now," then as long as you're comfortable with what you own, don't spend time worrying about today or this year. At most, consider buying battered leaders if you're in a position to do so -- perhaps America Online (NYSE: AOL) or eBay (Nasdaq: EBAY) are attractive for the long run.
So, regarding the stock market's decline: Common sense tells us that this happens (and frequently!) and that a decline isn't indefinite. Plus, great companies still perform well over the long term. As for relevance: The years ahead should be most relevant to your investing career, not this year. So smile and enjoy living -- especially if you live on a coast. (More on that in a second.)
Next topic: Celera!
Relevant news: Celera is going extreme! The company will sequence the genes of rare bacteria called "extremeophiles." The bacteria has been collected by Diversa Corp. from the most extreme habitats on Earth, including volcanic vents far beneath the ocean, and freezing caves at the planet's poles. (By the way, it is projected that 250 million years from now the Earth will only have one land mass again, Pangea Ultima. Any creatures still alive will be able to walk -- or crawl, slide, or roll -- from North America to Africa.) Some extremeophiles being sequenced by Celera have proteins that make them capable of surviving in temperatures reaching 235 degrees Fahrenheit, or 100 degrees below zero. Celera and Diversa want to understand how.
It is hoped that understanding these bacteria and their proteins will lead to the discovery of new drugs, laboratory compounds, and even industrial compounds. The databases that Celera is developing for extremeophiles will be offered to subscribers. Diversa has discovered 2,000 strains of extreme bacteria.
This week Celera also announced that it'll publish its human genome data early next year.
So, a Celera summary: Common sense tell us that this 22-month-old company is just beginning its life's work; sporting the most powerful sequencers in the world, Celera holds long-term promise if it proves adept at turning vast information into dollars. How is it relevant? If Celera is successful, it might help assure that human beings are one of the creatures still living on Earth in 250 million years.(Although, we need to leave this planet before the sun expands and fries it in 5 billion years. Dang.)
Next topic: Amgen!
Amgen's mission statement is "to be the world leader in developing and delivering important, cost-effective therapeutics based on advances in cellular and molecular biology." Amgen is meeting both goals (important and cost-effective) with its new drug, Aranesp.
Aranesp is a longer-lasting version of Amgen's blockbuster drug, Epogen, which treats anemia patients. Data released last week indicates that Aranesp has great promise for treating cancer patients, too. Currently, patients take three injections per week to treat anemia related to cancer. According to studies, Aranesp works just as well with only one injection every three weeks, saving time, money, and pain.
Aranesp should be approved for anemia related to kidney disease in mid-2001, and it should be filed with the FDA for cancer treatments by the middle of next year. Under good circumstances, Aranesp sales could reach $1 billion by 2003, while Amgen's total sales could top $8 billion by 2005, up from about $3.5 billion this year.
The commonsense theme here: Amgen is the most valuable biotech company in the world because it sells two important drugs, and it will likely modify these drugs enough to earn new patents. Amgen's relevance to the world: Cancer is the fastest-growing disease in developed nations (unfortunately), and the anemia market alone is estimated to top $5 billion in yearly sales.
To close, be sure to register to become a Fool if you haven't. It's free, simple, and it gets you rollin' toward Foolish investing. Also, check out the Fool's new InDepth News pages, which explain how to think about and invest in various sectors. As you read the free biotech articles in this new area, consider the Fool's excellent new Biotech Investing Guide, sold for three tens and a fiver. (For a broader perspective, check out the 17-industry (including two biotech) Industry Focus 2001.)
Have a great weekend!