Notebook: Alliance Loses Its Biotech Analyst

The departure this Friday of Lar Blumberg, Alliance Capital Management's biotech analyst, has investors wondering what will happen to his favorite stocks.

Blumberg and his brother, chief of gastroenterology at Brigham and Women's Hospital in Boston, have started a drug-delivery company called Syntonix. The brothers have brought in an impressive management team: Garen Bohlin, the former financial chief at the first-generation biotech concern Genetics Institute, is CEO. Gabe Schmergal, the former Genetics Institute president and CEO, is chairman.

Blumberg, a Syntonix director, won't devote all his time to the business and will stay on Wall Street in some capacity. He wouldn't comment on what he will do or on the company's technology and strategy.

Blumberg had a very successful year. Among his favorites: Medimmune (MEDI Quote), up 132% in 1998, Centocor (CNTO Quote), up 36%, and GelTex (GELX Quote), down 15%.

Now investors are debating what his departure means for his favorite stocks. Alliance owned 24% of the shares outstanding in GelTex at Sept. 30, according to data-tracker Technimetrics. It owned 14% of Medimmune at that time as well. Will Alliance now lighten up, sell off completely or hold on? (In recent months, Alliance is said to have blown out of its position in Centocor, of which Alliance had 17% at Sept. 30.)

Some investors argue that Blumberg's exit could be bad for the stocks, while others think it makes little difference. The thinking of the first camp is that once an analyst leaves, a new analyst comes in and wants to make his or her mark. The new analyst discards the losers because they are losers and the winners because the analyst won't get credit for them. The new analyst thinks: Why take the risk of an investment that has run up so much already? Also, portfolio managers may think it's easier to sell than to pay attention to the stock once the analyst monitoring it leaves.

When biotech analyst Kris Jenner replaced Skip Klein at T. Rowe Price in 1997, Jenner got rid of most of Klein's positions. The argument T. Rowe put out at the time was that it was concentrating on bigger-capitalization names. But part of the reason was that new analysts like to make their marks.

The opposite argument is that Alliance investment decisions are made by portfolio managers who can make up their own minds. Alliance also can replace analysts quickly.

Blumberg foresees no big changes. "There's nothing fundamental that's changed with these companies," he says. "We've owned these companies for a long time."

Slow Leak

Immunex's (IMNX Quote) stock climbed 4 15/16 to 147 15/16 Wednesday in anticipation of an article in the New England Journal of Medicine on the company's rheumatoid arthritis drug Enbrel.

Of course, everybody on the Street had the article already and were faxing it to their buddies and the press.

The journal published as its lead article a study on Enbrel in conjunction with methotrexate, a common rheumatoid arthritis drug. The data are out already and were used to garner Food and Drug Administration approval of the drug, which came late last year. The drug is off to a spectacular start, selling at an annualized rate of over $150 million already, according to an estimate by ING Baring Furman Selz.

But the fact that the study will be published in the most prestigious medical journal in the country -- and the lead article, no less -- is good for Immunex and its majority owner, American Home Products (AHP Quote). The companies' sales reps will be able to get into doctors' offices more easily brandishing the article.

So how does Wall Street manage to make this happy arbitrage? The magazine has a widely ridiculed policy of embargoing the press on its publications. It gives copies a week in advance to media outlets in exchange for the promise that they don't publish anything until late Wednesday afternoon. Newspapers publish their stories on Thursday. (TSC does not receive an embargoed copy.)

In the meantime, the issue is mailed to subscribers, many of whom are on Wall Street. They proceed to trade on the article, and the media has to sit tight.

"It's embargoed till Thursday, but we get it on Monday. It's foolish the way they do that," says a hedge-fund manager, happily watching the stock rise.

Big Fee

The Agouron (AGPH Quote) deal was quite a coup for PaineWebber, which advised the biotech in its negotiations with Warner-Lambert (WLA Quote). Warner is paying about $2.1 billion in stock. PaineWebber, whose health-care banking team is headed by Stelios Papadopolous, historically is not an investment banking powerhouse.

According to a former PaineWebber hand now on the buy side, the deal is one of the largest ever for the bank. PaineWebber has been Agouron's main banker since 1987. Papadopolous declined to comment, and a firm spokesman didn't return a call.