Mergers and acquisitions finally had a significant impact on the biotech sector last year, as for the first time in the history of the group a meaningful number of public companies disappeared. Those companies are being replaced by a new class of IPOs, while at the beginning of the pipeline, new companies continue to be formed. One issue for investors going forward is whether the sector is losing its best companies to M&A, or whether their replacements will be of equal or higher quality.

Biotech M&A traditionally has had a negative connotation, with the conventional view that companies with thin pipelines, low cash or limited technology platforms should combine in an effort to generate critical mass. But the trend in the latter half of 1999 was for many of the strongest companies in the sector to do deals with even larger companies.