Monday, March 29, 2004

What the Doctor Ordered

Flip through regulatory filings for Onyx Pharmaceuticals and you'll learn that it develops "innovative therapies targeting the molecular mechanisms that cause cancer." The tiny Richmond, Calif. biotech hasn't made a dime selling drugs, and red ink is all that lies immediately in the forecast for its bottom line. Still, its proposed drug to treat kidney, liver and other cancers--by blocking certain biochemical signals controlling tumor cell division and the formation of related blood vessels--looks promising. In the past year Onyx shares have rocketed from $7 to a 52-week high of $38.

Finding moon shots like Onyx, which he started buying when it traded in the teens, occupies a good chunk of Kris Jenner's time. Jenner is manager of the $1.2 billion T. Rowe Price Health Sciences Fund. His qualifications: a summa cum laude bachelor's degree in chemistry from the University of Illinois, a doctorate in molecular biology from Oxford University and a medical degree from Johns Hopkins. He also completed four years of a surgical residency at Hopkins, where he learned how to keep cool under pressure. "Nothing generates as much emotion as pulsating blood," he says, recalling the gunshot and stab wounds that found their way into the Baltimore emergency room where he trained.

Jenner, 42, says that his background gives him a much better chance of success than most investors at prospecting for medical outfits, particularly speculative ones whose fate rides on one innovative product. "The complexity or nuances of that evaluation are quite significant," he says. His investment fever chart bolsters his case. He took over the Health Sciences Fund in January 2000, after a few years as a biotech analyst. For the four years since, it shows a total return of 2.8% annualized, six percentage points higher than the S&P 500.

Jenner says he rarely uses stock screens to find investment ideas; most of the smaller outfits he goes for are off the charts in terms of traditional measures of value. Even Genentech (nyse: DNA - news - people ), a biotech "blue chip" with earnings, sells for a wild 47 times its cash flow (in the sense of net income plus depreciation).

Instead, Jenner bases his decisions on an assessment of the company's science, the quality of its management and the commercial prospects for its treatments, as well as its valuation.

Full story (reg. required) at