2001 Financial Markets Preview

Europe: Normalcy returns

OXFORD - European market watchers expect to see a return to calmer market conditions this year. While a return to normalcy could seem boring after the frenzy of 2000, it also could test the breadth of biotech's investor base, while more reasonable valuations could encourage more M&A.

Before the slump in prices in the fourth quarter, last year's leap in valuations brought many new general funds into the sector, including, as Nomura banker David Porter noted, "some funds which should not have been there at all." But after the sell off from the sector's highs, especially on the Neuer Markt, European investors who aren't dedicated biotech players may not readily return to the sector (see "Neuer Markt Performance", A8).

As Goldman Sachs analyst Steve McGarry noted, "biotech is not a necessary sector for non-dedicated funds, and liquidity in the sector is always low."

"Most very large non-sector dedicated investors have been and will most likely continue to stick to only the very largest cap biotechs, if at all," added Hypovereins Bank analyst Christiane Dienhart.

GPC, which rebounded to finish the year above its IPO price at E