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Biotech / Medical : Biotechnology Value Fund, L.P. -- Ignore unavailable to you. Want to Upgrade?

To: scaram(o)uche who wrote (1883)	8/22/2000 5:11:23 PM
From: nigel bates	Read Replies (1) \| Respond to of 4974

Frankly this is too much and it has to stop (FT) .... 'In the first two weeks of August US biotechnology companies garnered over $1bn in cash through intitial public offerings. Some investors are reacting by asking whether the latest spate of IPOs will spoil the year-long stock market party for US biotechnology. Executives in the sector are concerned that the latest onslaught will have negative effects. "Frankly, this is too much, and it has to stop," said Mark Levin, CEO of Millennium Pharmaceuticals, one of the industry's hottest companies. US biotechnology companies are raising more money than in any comparable period to date. During the first two weeks of August, 16 companies garnered over $1bn in cash through public offerings. Some have performed extraordinarily well. Dyax, for instance, soared 72% on the first day of trading. IPO fever has its roots in biotechnology's soaring stock market valuations, which have reached heights rivaling those in e-commerce. If they have any earnings at all, biotechnology groups often sell at astronomical prices. Last week Genentech traded at 164 times earnings, Medimmune at 150 times and Immunex at a whopping 234 times. Although the Nasdaq biotechnology index suffered a correction with the rest of the technology sector in April, it has since recuperated much of its loss and is double last year's level. Excitement over the birth of genomics and a slew of new biotechnology products helped trigger the buying frenzy, and it's not surprising that companies are eager to cash in. Yet the rise in share supply through the recent IPO blitz has also spawned fears of "volume fatigue". "The greater the number of companies, the more the money is spread around, and the less any one group gets," said Sergio Traversa, a New York-based health industry analyst. Some analysts note that many of the groups coming onto the market recently are more suited for venture capital financing that public investment. "There is a maturity issue," says Kristin Carey, managing director for the biotechnology team at Chase H&Q. "What would have been done as a private placement a year ago is now going public." The frenzy has sparked concerns that a bubble - similar to that for internet stocks - is building. Analysts say "momentum" players - who base decisions largely on market psychology - have moved heavily into the industry, which was once dominated by well-informed, specialised investors. The change in investor profile made the biotechnology sector - never among the steadiest of stock subsets - unusually volatile. A few years ago, just a half-dozen biotechnology companies were valued at over a billion dollars. "Now, about 50 companies are north of a billion, and some of our market caps vary by a billion dollars on a single day, depending on what Clinton, Blair or Craig (Venter, the head of Celera Genomics) say," commented Steven Holtzman, head of business development at Millennium. While biotechnology remains hot, signs of weakness are emerging. Early in the year, pricings consistently came in over estimated ranges. Recently, pricing has been choppier. Telnik was priced below range, and has been flat since its debut. Compugen has also languished, with its quote barely changed since its IPO. Inflows into the industry have also slowed substantially, from a peak of $3.7bn in February this year to less than $900,000 in July, according to Chase H&Q . Sceptics doubt momentum investors will have the attention span necessary for the newer biotechnology companies to bring new products to market - a process that can take up to a decade. The bubble, they say, may burst at any time. Yet others believe the sector is valued correctly. Just one blockbuster product would make even the highest valuations in the industry look reasonable for any particular company, they argue. The recent slew of IPOs can also be seen as a healthy addition to an industry which has seen a cash inflow of $10bn this year. "I think investors learned some lessons from the internet stocks," said Ms Carey. "Prices aren't as crazy as they were in that sector, and they reflect a real change that is happening, a complete transformation in the way drugs are discovered." ' snip