Hunks:
CNBC had the guy from Oscar Gruss (don't remember his name because nobody associated with biotech knows who the hell he is) on again yesterday. You provided great balance -- thank you!
However, when you have a guy taking a shot at a sector (in this case, biotech) like that, and when he enlists Barron's when his first shot doesn't hit home, at least make him name stocks! Please?
The highflyers came back. We needed that. Sector champions will thank CNBC for its role (don't misunderstand -- that role was largely consistent, IMO, with good reporting). The entire sector came back, including many companies that are fundamentally undervalued. Some of you scoff at combining the terms "fundamental" and "biotech". Bluntly put, you shouldn't -- the sector is here to stay, and it's wise to lend respect to those who can find good science and intellectual property in small companies.
Gruss took their shot. It didn't have effect. They took the same shot in Barron's, and they got both the attention that they wanted and the effect that they needed. Soon thereafter, they issued two press releases, indicating that they had hired expertise in neurology and infection/immunity -- that they will issue sector-specific reports on an ongoing basis.
They made a series of strategic moves to attract attention to their role in the sector, and to strengthen it.
It's the arrogance of Barron's that drives some of us nuts. They continuously make their forum available to weak arguments and without giving sufficient consideration to balance. Please don't join their path.
Here's more balance.......
washingtonpost.com
Biotech Firms Get a Cash Infusion
By Justin Gillis
Washington Post Staff Writer
Saturday , November 25, 2000 ; Page E01
When Philip L. Rohrer Jr. showed up for work a year ago as the new chief financial officer at Gene Logic Inc., he confronted a
tricky situation. The Gaithersburg biotechnology start-up had less than a year's worth of cash on hand and needed tens of
millions of dollars to improve the genetic database it sells to customers.
"My first question when I walked through the door was, 'Holy Hannah, what are you guys going to do?' " Rohrer recalled.
"They said, 'That's what you're here for.' "
In a matter of weeks, the fates smiled on Gene Logic and Rohrer--and on much of the rest of the U.S. biotechnology industry.
As 2000 dawned, so too did the most favorable year in history for financing biotech companies in the capital markets. Thanks
to a crash program that Rohrer led last Christmas, Gene Logic was the first local company to spot and capitalize on the trend,
but not the last.
Some of the best-known local companies have gone to market with supplementary stock offerings and are now sitting on
massive war chests--as high as $1.8 billion in the case of Human Genome Sciences Inc. and $1.1 billion for Celera Genomics
Group, both of Rockville.
With 2001 in sight, analysts at consulting firm Ernst & Young are estimating that biotech companies will finish 2000 having
raised at least $35 billion in all forms of financing--more than three times the level of any previous year and an extraordinary
turnabout after a long dry spell.
"It is absolutely amazing," said Scott Morrison, national director of life sciences at Ernst & Young. "There will be more money
raised this year than in the previous five years for the industry. We've never seen anything like it."
The large cash stockpiles have allowed companies to launch new initiatives at a time when much of the high-tech sector is
suffering a meltdown. But some worry that the capital will lead companies to take on more speculative ventures and burn
through their reserves before establishing a stable stream of revenue. After all, few biotech companies have any near-term hope
of showing a profit.
Some of the reasons money has flowed freely into the biotech sector are obvious: This was the year Celera and a rival
international team led by the National Human Genome Research Institute announced early maps of the complete human genetic
code. That milestone, celebrated by President Clinton at a ceremony in the White House East Room, awakened investors to
the long-term potential of the biotech industry to deliver medical breakthroughs.
But interest in biotech stocks appears to be based on more than the news of the moment. Fundamentals in the sector have been
improving for some time, with more and more companies turning the corner to profitability. It has become clear that a good
number of these businesses have a shot at becoming large, highly profitable enterprises in the next few years.
And, in contrast to the mystifying business models of many Internet companies, investors can grasp the concept underlying
biotech companies: Their work is directed toward treating disease, and people will pay good money for medicine.
"There are some people out there spinning that biotechs are the same as dot-coms and they're going to go the same way," said
J. Craig Venter, president and chief scientific officer of Celera. "They're not. People do need new drugs, which is very different
from one more sales site on the Internet."
To be sure, biotech shares have been under pressure during the recent turmoil in the stock market at large. They also dipped
sharply in the spring amid short-lived fear of changes in the law covering genetic patents.
Raising funds can still be tough for some smaller companies that are early in their drug-development cycle. EntreMed Inc. of
Rockville, known for its promising work on potential cancer treatments, was forced to withdraw a proposed supplementary
offering of 2 million shares during the spring downturn. The company later succeeded in placing some shares privately, and has
plenty of cash on hand, but it has yet to venture back to Wall Street.
For most companies, though, valuations remain much higher than they were a year ago, and the episodic churn in the markets
has not shut down the parade of successful new and supplementary offerings. Indeed, at least two share offerings are coming
soon from local companies--an initial offering from GenVec Inc. of Gaithersburg and a supplementary offering from Guilford
Pharmaceuticals Inc. of Baltimore.
Even if biotech stocks collapsed tomorrow, this year's successful fundraising has fundamentally altered the strategic situation for
several local companies. In the January stock offering that Rohrer put together in his first weeks at Gene Logic, the company
raised $247.5 million. It still has $231 million on hand--enough to keep the company flush for years even as it spends heavily on
its database.
Celera and Human Genome Sciences, with bank accounts exceeding $1 billion apiece, have vaulted into a new financial league.
Celera, a database company, is spending the money to launch a broad new initiative to identify and understand proteins that
play a role in human illness. It recently hired Scott Patterson--an executive from Amgen Inc., the world's largest biotech
company--to head the effort.
Human Genome Sciences, which uses genetic information to develop drugs, can use its $1.8 billion account to take more of
them into expensive human tests without necessarily seeking deep-pocketed drugmakers as partners, a fact that should improve
the company's profitability if any of its drugs get on the market.
"With money, you can afford to develop more drugs, take more risks," said William Haseltine, chairman and chief executive of
Human Genome Sciences. "You can afford failure."
The newly swollen bio-coffers do raise a concern: During successful fundraising periods in the past, analysts say, some biotech
companies spent profligately--taking on too many projects, scattering their resources and ultimately accomplishing little. The
fear, in other words, is that some companies will behave like a kid who gets a $100 bill as a birthday present and fritters it
away in days.
Mark Edwards, managing director of Recombinant Capital Inc., a consulting firm in Walnut Creek, Calif., that closely tracks
biotech finances, expressed hope that the industry has learned from lean times and will be disciplined and focused in deciding
how to spend its newfound capital.
"Is this a huge windfall for biotech? Absolutely," Edwards said. "Has biotech got to show greater maturity than perhaps in years
past? I certainly hope so." |
