Igen given big lift by Pfizer, Soros Gaithersburg firm's share price zooms 742% since April; $40 high set yesterday


Talk about a high-flying stock. Igen International Inc., a relatively unknown Gaithersburg biotechnology firm, has seen its share price zoom an astonishing 742 percent since April.

Yesterday, shares jumped $4.5625 to an all-time high of $40 -- more than eight times its 52-week low of $4.75 of April 24. The fastest run-up in the company's stock price has occurred since Christmas, when shares traded at $12.75.

Propelling the ascent is a recently signed deal with pharmaceutical giant Pfizer Inc. and a thumbs-up from two investment funds tied to investment guru George Soros. Both are betting on the company's latest diagnostic technology, which can rapidly screen blood and urine for diseases and other medical conditions at a lower cost than currently available systems.

Under a deal announced March 5, Pfizer will buy two of the company's second-generation computerized drug screening systems this year, providing Igen with a steady revenue stream by supplying Pfizer with the special fluids and other materials used to conduct the tests.

In early February, Soros Fund Management LLC and White Rock Capital LP, a Dallas-based investment fund that includes billionaire Soros, increased their combined holdings in Igen to 8.7 percent, up from 5.3 percent, a 64 percent boost.

"It's nice to see some recognition of the company's value," George V. Migausky, chief financial officer at Igen, said yesterday. He declined further comment on the rise in the company's share price.

As for the Pfizer deal, Migausky said the relationship is not new; Pfizer had been a client for Igen's earlier test system.

The recent agreement was significant, Migausky said, because "Pfizer wanted to be the first one in line" to acquire Igen's improved test system. The company expects the deal to give it leverage to market the system to other big pharmaceutical companies.

The significance of Igen's new diagnostic system, analysts say, is that it allows screening for a wide range of diseases and medical conditions to be conducted in hospitals, acute-care centers and doctors' offices rather than in centralized laboratories.

"It's like what happened with computers 10 years ago moving from big mainframes to desk tops. It opens up a very large market opportunity for us," Migausky said.

Analysts say the company also is sitting on a potentially large revenue source in a lawsuit filed against Boehringer Mannheim GmbH of Germany, the No. 2 diagnostics maker in the world, for breach of a licensing deal. That deal called for a $50 million payment and 9 percent sales royalty.

Igen sued Boehringer Mannheim in September 1997, but analysts say the suit could be settled by Boehringer's new parent, drug giant F. Hoffman-LaRoche Ltd.

Joseph E. Besecker, founder and chairman of Emerald Asset Management, a money management firm in Lancaster, Pa., believes Igen could see a $250 million to $600 million lump-sum buyout of the royalty agreement from Hoffman-LaRoche -- if it agrees to settle the lawsuit.

"This company is like finding a big pile of cash," said Besecker. Emerald recently boosted its holdings in Igen to about 1 percent.

Besecker was bullish enough on the company to cite it as one of his favorite small-cap picks in an interview with Bloomberg News March 13. That didn't hurt the stock's climb either.

In Besecker's view, a lot of the early run-up in Igen's stock price this year was driven by analysts' expectations that Hoffman-LaRoche will settle the lawsuit.

"But now Wall Street is beginning to appreciate the core technology of this company," Besecker said yesterday. "To me there's great leverage there. I think the stock is still undervalued."

The company, Migausky said, is hoping its new screening system becomes the industry standard of the diagnostic market.

The Pfizer deal, said Besecker, was a signal to Wall Street that that could happen.

The $7 billion diagnostic test system market, however, is considered intensely competitive.

Also, it could be a while before Igen, which went public in 1994, earns a profit.

The company posted a $7 million loss on $12.2 million in revenue in the first nine months of its 1998 fiscal year, which ends March 31. It is expected to close out the year in the red. And analysts surveyed by Nelson International Inc. project a loss in 1999.

Besecker says he's focused on the company's long-term potential rather than short-term earnings.

He is also bullish on the company's management and scientific team, which includes founder and Chairman Samuel Wohlstadter. His background includes helping to launch Amgen Inc., the most profitable biotechnology company in the country.

"You won't see earnings this year, or maybe even next," Besecker said. "But there is a lot of long-term value in this company. The second-generation technology could be explosive."

Pub Date: 3/25/98

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