Ebb & Flow

Last Friday was the third anniversary of the popping of the genomics bubble, and biotech valuations continue to drift down. Although the drop is no longer precipitous, the BioCentury 100 index is testing whether it wants to set up shop beneath the 900-point level.

The index did fall through the 900 floor on Monday, losing 1.3% to 890 on the day. It was the first time the index had fallen below 900 since the week ended Oct. 30, 1998, when it settled at 844.

The index dipped another 1% to 881 on Tuesday before gaining traction to close the week up 0.8% at 909.

A further retreat would prompt technicians to look to revisit the floor of the prior bear market. The bad news: that floor was more than 200 points below current levels at 692, hit on Sept. 4, 1998.

Pacific Growth banker George Milstein pointed out that the geopolitical situation has investors sitting on their hands. "It's a big overhang and people just aren't willing to part with their money." He suggested there could be a small rally in the overall market once the war overhang is removed, but it would not be biotech-specific.

Looking for a silver lining, Damian Lamb of Genesys Capital noted that biotech continues to compete well for private capital. "The good news is that biotech is still high on the list from a limited's standpoint. Five years ago it was telcom, tech, and software, and biotech was way down on the list."

If anyone needs reminding, the genomics bubble was burst by comments by then President Bill Clinton and U.K. Prime Minister Tony Blair regarding the patentability of the human genome (see BioCentury, March 20, 2000).

Follow-on march continues

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