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Momentum

Solid first quarter earnings and the recent spate of product approvals have brought a rush of new investment into biotech. The convergence of those fundamentals has injected momentum (remember that word?) into the sector. Throw in the American Society of Clinical Oncology (ASCO) meeting, which is just around the corner, and you've got a yeasty environment for speculation.

Buysiders and market watchers polled by BioCentury provide divergent views on how long the current run will continue. Some suggest that the selloff over the past three years was so severe that the industry was poised for a bounce. Others argue that the rally is justified for the larger cap names that have delivered on products and profits, but warn that many smaller cap names have gotten ahead of themselves.

They all agree on two things: First, the industry has not received this much attention since the genomics bubble. Second, and more importantly, unlike the genomics craze, the mania is over tangible value drivers like products.

"Biotech had a good earnings season, there's a more relaxed regulatory environment, there's been a good flow of clinical trial news, and the money's coming into the broader markets," said Wayne Rothbaum of Quogue Capital. "What else could you ask for? That's the moon and stars aligning."

Genentech Inc. (DNA) last week showed that the momentum pump was fully primed, with news that its Avastin monoclonal antibody plus chemotherapy improved survival in a Phase III trial in colorectal cancer. Investors drove up DNA's valuation by $11.7 billion to $31.1 billion on the news (see A7).

Small caps, too

Investors aren't only paying attention to the top tier. John

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