Monday, November 20, 2000
Judging by the amount of money brought in last week by publicly
held biotech companies, one would have difficulty discerning that the tech market
(yes, including biotech) is in a nasty funk.
Seven PIPEs, two IPOs and three follow-ons raised $1.2 billion.
The feat is more impressive in a week in which the biotech market was hit with
profit taking that drove the BioCentury 100 down 10 percent. The index has fallen
16 percent since the Nov. 7 U.S. presidential election, and has now surpassed
the 11 percent drop in NASDAQ composite. NASDAQ traded down only a fraction
of a percent in a volatile week last week.
The biotech downdraft was sparked by a Barron's article
that declared biotech profits remain "dangerously exposed" and recommended that
investors take profits while they still exist (see BioCentury Extra, Monday
Nov. 13). The article, along with a technology sell-off spurred by an
earnings warning from Hewlett-Packard, drove the BioCentury 100 down 8.5 percent
Still, Mitch Silber of The Carson Group argued that the biotech
fundraising feats have everything to do with the sector's performance relative
to other tech groups. Even with last week's slide, biotech remains a shining
star. Year-to-date the BioCentury 100 is up 47 percent, while NASDAQ is down
26 percent. "Biotech is the best performer in the NASDAQ composite, and it's
really been seen as the sector that's immune to economic concerns and technology
earnings surprises," he said.
He's impressed at how the sector bounced back from the negative
Barron's article, which ran over the prior weekend. "On Monday and Tuesday,
the article caused a stir, and a lot of people were asking is this the spark
like the Clinton/Blair comments in March? But the sector's come back nicely,"
However, the stock sales also raise the question of whether
the new deals are taking money away from the aftermarket. Robertson Stephens
banker Mark Simon doesn't believe so, arguing that massive amounts of money
wants to find its way into the sector because investors see biotech as the one
place to make big returns.
"In the 90s, businesses like the internet, the personal computer
and wireless technologies represented open-ended upside. But open-ended upside
is no longer found in the internet and high-tech sector, and biotech is now
the one sector that offers that kind of upside," he said.
Tarnished by success
All three stocks mentioned in the bearish Barron's article
remained down at least 15 percent or more on the week. And of the three, only
Idec (IDPH) managed to trade up from its Monday close, helped by the pricing
of its $472.7 million follow-on on Thursday. IDPH was still down $29.188 (15
percent) on the week at $170.50, after falling $30.188 to $169.50 on 3.3 million
shares on Monday.
Antibody play Protein Design Labs (PDLI) closed Friday at $85,
down $40 (32 percent) on the week, after tumbling $29.50 (24 percent) to $95.50
on 3.4 million shares on Monday.
Meanwhile, small molecule drug developer Vertex (VRTX) closed
Friday at $63.125, down $25.688 (27 percent) on the week, after shedding $17.625
(20 percent) to $71.188 on 2.3 million shares on Monday.
The stocks were highlighted in Barron's because they were the only components in the 17-company AMEX Biotech Index that have traded up more than 50 percent in the last three months.