The best advice for anyone selling products has always been to give the customers what they want. Today's customers want to know how buying stock is going to make them money, and they want to hear novel, well-differentiated stories that will fly in a managed care environment. Investors continue to harbor concerns about biotech - they are what Vector Securities International fund manager Sandra Panem describes as "unenthusiastic bulls" - and companies that want to raise money must show they are addressing the issues investors consider critical.

"Don't go out there thinking you'll sell your wares on technology and promises," said Frank Baldino, president and CEO of Cephalon Inc. "You need a complete strategy from bench to market and you need to hedge your risks against product failure."

Investors are more sophisticated than in 1991 and they're not going to follow the herd, said Sepracor Inc. President and CEO Tim Barberich. Furthermore, they already know the companies that trade publicly and they know their products. "You either have what they want or you don't and they've already made up their minds they want to get into a certain risk profile. They're really risk sensitive on the downside."

Two investment issues

Risk reduction rules. Investors are looking for reasons they can have confidence that a drug will work rather than having to wait to see it fail at the end of Phase III trials, said Barberich. "They know it's a hot market for pharma and biotech stocks and they want to put their money to work, but they don't have the same risk appetite as in the past. That makes it really tough for companies