By Randall Osborne

Editor

As "dot-com" firms, the likes of which once diverted hefty investor dollars, began to dry up and blow away, the biotechnology industry's fortunes continued to ascend, climbing to heights hitherto unseen.

The year 2000 rocked.

Biotechnology raised $36.9 billion during the year, a whopping triple-plus increase over 1999, with an initial public offering window that opened, for a while at least, so wide it seemed the entire wall was blown out.

Credited for much enthusiasm from deep-pocketed outsiders was the race between government scientists and those in the private sector, led by trailblazing Craig Venter, to map the human genome. A gold rush was on.

The same had been said earlier about the "dot-coms," but these were newcomers, and many had no products ­ only an ethereal presence on glowing screens that shortly would flicker out.

Biotechnology proved it was different. Wildly different, for a period during the first part of 2000.

"People just forgot what valuations were all about," said biotechnology analyst Elise Wang, formerly with PaineWebber since 1996. "A lot of people were piling into the market just because they wanted to keep pace with [the surge]," she said.

In 2000, "we've seen ups and downs, as we will always see in biotech, but this year has been exceptional, especially when you compare it to the rest of Nasdaq or the technology stocks," said Wang, who said she is exploring other options since parting ways with PaineWebber. "This [year] was a follow on, even, to the previous year, which was also good. I think the sense also is that there might be more sustainability. More products came to market."

DNA prospectors briefly halted their pick axes in mid-air when President Clinton and British Prime Minister Tony Blair came forth with a joint statement ­ widely interpreted as just plain weird ­ on gene patents.

What did the politicians say? What, exactly, did they mean? Nobody seemed certain.

The now-infamous Clinton/Blair statement, which came down in March and apparently was designed to reassure all regarding the wide availability of genome data, seemed (at least to the reflexive market) to deny the possibility of patenting discoveries made with the findings.

In April, Clinton sought to "clarify" himself on the subject.

"On the patent thing, you know, Tony Blair and I crashed the market there for a day and I didn't mean to," Clinton said, going on to voice confidence in the Patent and Trademark Office, and declaring the whole matter in good hands.

Hard-hit genomics stocks, which had been sliding before the statement, came back to life. Venter's venture, Celera Genomics, gained a whopping 56 percent the day Clinton became "clear."

The market sinkage had begun ahead of the Clinton/Blair statement, Wang said, so it "wasn't the actual event that woke up everybody," and was "more like a nail in the coffin." And Clinton's follow-up couldn't bring about a full revival.

By summer, Celera had achieved a rough draft of the genome, and so had the government. But the season saw biotechnology, which had been staying above the fray, following the general market trend, which was not encouraging, as investors laid low and awaited financial reports.

Still, the cash festival had not shut down entirely.

"We went down for a period, and then saw a gradual return," Wang said. "But, instead of seeing a rapid rise, we saw more of a gradual appreciation. The financing market is being much more selective about what deals can get done."

Funds kept finding their way into biotechnology even after environmental activists crusading against genetically modified organisms in crop production got what they'd been waiting for: In the fall, word leaked that taco shells had been made with traces of genetically engineered corn, approved for feeding to animals, but not humans.

Nobody died.

November saw another slump, which may have been due to various factors: profit-taking in the sector, a confused presidential election, and general investor skepticism about high-tech stocks, but Wang said this ought not to obscure what's been a powerfully positive trend most of the year. That movement may yet begin again.

In any case, the year 2000 has been an historic ride sure to inspire cheers at the upcoming Chase H&Q Healthcare Conference in San Francisco ­ an event that "itself may draw the interest level into the sector again," Wang told BioWorld Financial Watch.

"This is an event-driven sector, and we're moving into the early part of the year, when announcements get made," she said, noting the Chase H&Q conference traditionally has been a popular venue for breaking news.

Biotechnology's future can't be guaranteed prosperous, of course, but Wang said the upswing seems durable. Linking the industry's fortunes to those of high-tech, although it might have been useful as the dot-com promise dwindled, is no longer wise, she added.

"The overlap that is most relevant is the momentum players," she said. "They might have gotten into the biotech game as an area that had an opportunity to run at the same pace. But you don't need the momentum players around for a sustainable, appreciable market."

Such investors "will always be there," she added. "They'll just be more cautious." And they will always need to be reckoned with, when biotechnology's progress is measured.

With genome-mapping much in the news, genomics continued to capture the fantasies, and cash, of investors. Companies touted any genomics capabilities they had, and some managed to work the word into their titles. But Wang said that, in genomics as in other areas of biotechnology, backers are starting to look hard at the potential for tangible, marketable products. It's about drugs, after all.

"You're going to see more balancing," she said. "We'll see more genomics companies start to shift into product companies."

Meanwhile, the propensity for pharmaceutical companies to merge with their own kind continued in a big way, creating drug-hungry juggernauts likely to shop even more avidly in biotechnology for those potential products.

The oft-cited "evolution" and "maturity of the biotech industry" are phrases used by Wang in explaining the historic year 2000 ­ and they're more appropriate as time goes on, she said.

"You can point to 40 or 50 companies with a market cap of over a billion," she said. "You couldn't have said that a couple of years ago. That's how [the biotech industry] distinguishes itself from the Internet businesses. We've been around a lot longer than that." *