.bodytext {float: left; } .floatimg-left-hort { float:left; margin-top:10px; margin-right: 10px; width:300px; clear:left;} .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 10px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 10px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 10px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} Dear Mr. Berko:

Dear W.J.:

Ariad Pharmaceuticals Inc. (ARIA-$5.03) is a biotech firm that treats cancers with small molecules that control unique signals given by cancer cells. And it seems ARIA has some impressive small-molecule therapies to treat tumors, sarcomas, leukemia, lymphomas, brain cancers, prostate and endometrial cancers. Its AP23573 and its AP24534 formularies are undergoing clinical trials for multiple cancers, and Merck & Co. Inc. (MRK-$54.64) is funding stage II and stage III trials to the tune of $450 million plus $200 million for reaching certain sales thresholds and another $200 million for global development. ARIA’s treatment for just metastatic sarcoma could easily generate revenues of $1 billion annually.

ARIA has about $1 million in revenues, it employs 102 people, its book value is less than the total of two dimes and a nickel, and it has never earned a peso in its whole life. This research company is betting on Merck’s continued dotage, patience and bank account plus the expected success of AP23573 and AP24534.

About 27 million of ARIA’s 69 million shares are held by institutions, and Chief Executive Officer Harvey Berger owns 748,000 shares. The shares traded as high as $6.40 recently, and if Merck continues support, some on the Street believe ARIA could trade between $10 and $12 a share in the next 12 months. Though ARIA seems to have some exciting research with very promising near-term results, the stock doesn’t float in my moat. It’s too speculative for my tender psyche, but if your risk tolerance extends to the craps tables, then ARIA could be a good roll.

Lincoln National Corp. (LNC-$65.60), an $11 billion revenue insurer, has been on a roll since early 2003, when it traded at $25 a share. Rising to a high of $75 this year, LNC has given up nearly 10 points and trades at a tad less than 12 times this year’s expected earnings of $5.60 per share.

LNC hasn’t grown its business the usual way by hiring and training salespeople, giving them new products to sell and providing its sales force with insurance leads. Rather, during the past decade LNC has purchased Delaware Management (investment management and mutual funds), the life insurance operations of Cigna and Aetna and the classy Jefferson Pilot insurance company. Jefferson Pilot operations (including radio and TV stations) may be LNC’s key earnings driver this year and next.

LNC sells the same products sold by AXA, Equitable, MetLife and Hartford, but its hot new product is variable immediate annuity with a guaranteed income that can increase if the sub-accounts (mutual funds) increase in value. Many investors think this is a dynamite product, because a significant portion of the guaranteed income (the guarantee can increase but never decline) is not taxable.

LNC is a fine company, rated A-plus by A.M. Best & Co., but the stock is about as exciting and sexy as a bowl of tapioca. Its dividend has increased in each of the last 20 years, and the current $1.58 yields 2.4 percent. Because 2008 earnings are expected to grow by 12 percent, I’m comfortable suggesting that LNC’s dividend could be raised to around $1.65.

However, if you want to be a smarter insurance investor, I recommend that you consider Genworth Financial Inc., which was formerly a division of General Electric Co. Genworth (GNW-$27.75) is down 25 percent from this year’s $37 high and trades at 7.7 times next year’s expected earnings of $3.60 per share. I think 200 shares of GNW will give you more bounce for the ounce than 100 shares of LNC.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net.© Copley News Service