Corporate buyouts and Wall Street's valuation of a company's technology can be like the flip sides of a coin: If the Street places a high value on technology and hence stock prices, small companies may be able to avoid mergers or demand high dowries. But if the Street undervalues technology, larger companies will be able to snatch up the minnows at bargain prices.

Whenever an acquisition reduces the ranks of the biotech 200, such as last week's deal between Sphinx Pharmaceuticals Corp. and Eli Lilly and Co., thoughts inevitably turn to the industry consolidation that has been heralded on and off for years.

SPHX is a perfect example of the love-hate relationship Wall Street has had with biotech stocks and of the Street's difficulty in evaluating technology when it can't be measured with simple milestones.

Interest lost

SPHX raised $75 million in a January 1992 IPO at $15 a share. But the stock sank as low as $2.50 in mid-1993 after the company dropped its psoriasis program and scaled back spending, let go of its president and vice president of R&D, and saw partner Lilly scale back on their collaboration.