Fool.com: Biotech's Next Phase [Commentary] December 16, 2003:

"A good first step when investing in biotechnology and pharmaceutical stocks is to evaluate the clinical pipeline, the markets the company or specific drug addresses, and the expected or likely revenues from drugs in development. From there, one can begin to make a valuation judgment based on expected future revenues. A sophisticated investor can then adjust these revenue projections to reflect the risk of FDA rejection. A 90% chance of rejection in early-stage phase I trials; a 50% chance in phase II; 20% in phase III; and 10% post-phase III are rough guidelines.
When I see a company like Pain Therapeutics (Nasdaq: PTIE), with a pair of phase III trials for drugs targeting billion dollar markets underway and trading at a market cap of $150 million, I take a second look. Introgen (Nasdaq: INGN) is another with advanced products, but a market cap just shy of $200 million."