BioCentury
ARTICLE | Finance

Mapping the plunge

April 5, 1993 7:00 AM UTC

Political uncertainty over the course of health care loomed large in the first quarter and will continue to do so, but biotech industry insiders place the lion's share of the blame for the sector's poor performance on the internal issues of product development and earnings growth.

The year-long string of product failures has grown to impressive proportions. The recommendation by an FDA advisory committee for approval of Chiron Corp.'s Betaseron and the likelihood of a positive recommendation for Genentech Inc.'s Pulmozyme may reverse the trend. But the spurt of good news has done little so far to assuage dismayed investors. On top of the quarter's product disappointments came worries about earnings at Amgen Inc., which raised questions about sustainable earnings growth once companies achieve profitability. Those worries helped slice off almost half of AMGN's market cap - and if Amgen was worth half of what investors and analysts thought, the implication is that companies following in its footsteps are also worth less. "The Washington influence, although it's real and it's there, is perhaps overblown," said Dan Purjes, chairman of Josephthal Lyon & Ross. "What's having more real impact is the continuous progression of bad news." The events left investors wondering whether biotech companies will have something to sell, and when they will have it, said Liposome Technology Inc. CFO Peter Leigh. "That's harder to answer when you have spectacular failures and longer product development timelines." Most blunt was one CFO, a veteran of the pharmaceutical industry, who wished to remain anonymous. "The types of mistakes that are being made now by the biotech companies just weren't made by the pharmaceutical companies," he said. ...