By Nuala Moran

BioWorld International Correspondent

AMSTERDAM, the Netherlands - With stock markets in turmoil worldwide, there was much discussion here Monday at the European Life Sciences Conference on the likely effect of the current volatility on the development of biotechnology in Europe.

"The rise and fall of the past three months has corrected the market into reasonable numbers, except that we had a side trip to the stratosphere," Stelios Papadopolous, managing director of the investment banking division of S.G. Cowen Securities Corp., told the conference. "This is a replay of experiences we have been through before."

While it was obvious that the high numbers could not last for long, the market still is higher than last fall. "That's the essential point," he said. "To go from $5 to $50 to $15 is not so bad."

Nick Woolf, senior analyst at ABN Amro, said that despite the swings he believes the overall market is becoming more stable. "Investors are a lot more savvy about risks and reward in biotech than before." At the same time, he said, as the industry matures, the risk profile is very much improved. "There are also a lot of new, experienced management teams setting realistic expectations. This is important from a capital market standpoint."

The European sector has been hit by "dot-com" contagion, said Francois Maisonrouge, head of the European Healthcare Group at Credit Suisse First Boston. "In October last year it was impossible to get a deal done. Now people are moving into biotechnology as a proxy for the new economy. This has helped the biotech market and it has hurt the biotech market."

He noted that recent movements have driven the market down, with a fall of 30 percent overall in March, but that biotech overall still is up from mid-1999.

Rob Zegelaar, of the venture capital company Atlas Venture, also blamed the e-commerce stocks for the volatility that has hit biotech. "The past year was the strangest in my venture career. We saw the Internet take off and come down, causing biotech to come up and down as well."

However, Zegelaar said the fundamentals of the industry are stronger than ever, and there still is great enthusiasm for biotech stocks.

It is the "concept stocks," such as genomics, which are most prone to volatility. In many other technologies there now is a history and track record of how companies have fared, allowing investors to compare with the past. Genomics in contrast is a complicated proposition and it will be five to 10 years before investors can compare new launches with what went before.

Maisonrouge said there is a lot of liquidity looking for investments, and investors are looking to participate in biotech IPOs. "But at the moment they don't want to invest in follow-on rounds."

Despite liquidity, the fragmentation of European stock markets is continuing to hold back market development. "Companies looking for an IPO have to spend time deciding between markets," said William Powlett-Smith, life sciences partner at Ernst and Young. Nasdaq has announced plans to launch in Europe, and Powlett-Smith said it remains to be seen if it can create a truly pan-European market.

Overall, there is agreement that volatility will not go away, and biotech will have to learn to live with it. Papadopolous said investors must learn to distinguish apparent volatility from real volatility. "Friday may have seen the biggest points fall ever on Nasdaq, but it's the percentage drop that matters."

On the other hand, there is an increase in real volatility because an increasing number of investors are reacting rapidly to raw data. "Ten years ago you read about company developments in the newspaper the morning after." Now a release of information at 2 p.m. is broadcast worldwide. "Because investors react straight away before the data is assessed, there is a divergence of opinion about its significance," he said.

However, Papadopolous concluded that if it were not for volatility there would not be a biotech sector. "Companies only grow when volatility allows. Learn to live with it and go forward."

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