12:00 AM
 | 
Feb 20, 2001
 |  BioCentury  |  Finance

Ebb & Flow

Knowledge may give weight, but accomplishments give luster, and many more people see than weigh.

- Earl of Chesterfield

Investors took a close look at the genetic map last week, and decided to wait until accomplishments (read:drug leads) come from the data before assigning luster to any one stock. If there was one clear message resonating from news of the map, it was that knowledge of the genetic code will make it more difficult - not less - to pick the next group of successes in the genomics space.

Investors' unwillingness to assign instant value to the accomplishment could be seen in the movement of the 10 genomic stocks tracked by BioCentury. After a hot start on Monday, the group retreated to shed $259.6 million in market cap (2.2 percent) on the week to $11.5 billion (see "Cooling Trend", below). The group is now down $21.4 billion (65.1 percent) from the $32.9 billion valuation prior to the Clinton/Blair comments about the patentability of genes last March. Monday's move drove the group up by $724 million (6.2 percent) to $12.5 billion, led by a $6.15 (15 percent) gain to $47.75 by lead mapper Celera (CRA). CRA was hit by profit taking to close the week at $42.563, up $0.96.

"People expected the map, so now they are asking what does it mean and who stands to benefit?" said Nicole Vitullo of Domain Partners. She believes the tepid response reflected the Street's understanding that it will take a long time before the data "manifests itself into new and improved therapeutics." Over the near term, she does see the map spurring investment in a new crop of downstream drug service companies.

Wayne Rothbaum, partner at TF/Carson Group, saw the quick sell-off more as a function of the current bear market, in which long-term rallies are difficult to sustain as smart money uses upticks to sell. "Investors are selling into any strength they find. The momentum money is on the sidelines, and when there is any momentum, it gets knocked away," he said.

Sven Borho of OrbiMed Advisors believes investors are taking a wait-and-see attitude after "realizing that the sequencing of the human genome is not going to turn out a ton of new drugs quickly. With data like splice variants and gene fragments coming from the map, everything seems to be getting a little more complex than was previously thought, and investors are disillusioned by that."

Borho also believes that lack of a profitable leader in the genomics space is keeping investors on the sidelines. "We don't have a really successful concept genomics story that's made an impact," he said. "A lot of the companies have a great, sexy technology base, but at the moment, no one has seen a working business model, and that's a bit disheartening." He noted that Affymetrix (AFFX) could change that...

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