If summer is the time for fishing, biotech investors will be encouraged to find more big-game fish in the larger tide pools: Between Dec. 31, 1999 and last Friday, the number of companies valued above $700 million - the threshold for getting into BioCentury's mid-tier group - has increased to 75 from 52. That growth is particularly helpful to non-core investors that can only invest in larger cap companies. A $700 million company still may be a challenge to get into and out of, but it's a lot easier than trying to get liquidity in a $250 million company.

A total of 24 companies that were publicly traded at the end of 1999 have made the jump to BioCentury's mid-tier group between $700 million and $3 billion. By contrast, only seven companies have be demoted into the lower-tier (see "Biotech's Tide Pools", below, and "Tier Jumpers", A12).

In the same period, the top tier expanded by nine companies to 26, as 12 companies moved up and three fell out (see BioCentury, July 2).

Some companies have jumped upstream on strong fundamental progress. Cor (CORR) has increased the market penetration for its Integrilin eptifibatide for acute coronary syndromes. Aviron (AVIR) has straightened out earlier snafus with the regulatory filing for its influenza drug FluMist and now has an FDA panel meeting on July 26-27; Scios (SCIO) this week is due for final FDA action on its Natrecor nesiritide to treat acute congestive heart failure. And CV Therapeutics (CVTX) is conducting Phase III trials with its ranolazine anti-ischemic agent to treat chronic stable angina.

However, Jeffrey Casdin of Cooper Hill Partners warns that less informed investors may be bidding other stocks into the mid-cap space by playing biotech lotto - moving down the value chain without regard for fundamentals. "Biotech five or more years ago was not a place that a lot of people, outside of nuts like me, were involved in," he said. "But post-1999-2000, it has become a sector that investors have to play to generate high performance. And it was primarily momentum players, who know even less than those who have been in the industry only a few years. They're saying 'it's got upside, it's a place I have to have money, so let's go down the value chain.'"

Casdin also is seeing some early signs of a re-emergence of day-traders and chat room fodder in the biotech sector. "We're starting to see a little bit of a harmonic there, but it's only a third, fourth or fifth harmonic, which is not very strong," he said.

Bad Friday