12:00 AM
 | 
Jan 07, 2002
 |  BioCentury  |  Finance

Europe: After melt-down, waiting for a U.S. rally

Buyside View: Europe

After melt-down, waiting for a U.S. rally

Much like in the U.S., European buysiders predict targeted buying of companies with revenues from marketed products or products in late stage clinical trials, with a broader rally perhaps coming in the second half of 2002. But they expect any rally in Europe to come only on the heels of one in the U.S.

In addition, the lack of mature companies, especially in continental Europe, and the resulting paucity of specialized fund managers with a focus on European biotech, means that European fund managers probably will continue to put the bulk of their money to work across the Atlantic.

Further complicating things, some national markets are largely under the control of disillusioned local retail investors. Indeed, the fall in Germany's Neuer Markt has had a lingering effect on valuations and investor sentiment all over Europe.

"As a result of the bloodbath in the Neuer Markt in 2001, everything in Europe has been taken down," said Andrew Clark, who manages about $100 million in biotech funds at Britain's Reabourne Ltd. "With a largely inexperienced investor base, it's really not a surprise what happened in Germany."

Unfortunately, a number of fund managers think the Neuer Markt debacle will take some time to overcome. "Certainly people got their fingers burned in Germany, or they're still stuck in and they can't get out. In addition, the German economy is virtually in recession so that doesn't encourage investment either," said Andrew Musson, global life sciences director at 3i Asset Management Ltd. in the U.K., which has £300-£400 million ($431-$575 million) in healthcare stocks.

"It's hard to see a recovery from that. It's a shame because there are great companies like Evotec OAI AG (NMarkt:EVT, Hamburg, Germany) and Qiagen N.V. (NMarkt:QIA; QGENF, Venlo, the Netherlands). But I don't think German retail investors will come back in 2002," he added.

"A stock market that is heavily driven by retail is much more prone to show a casino mentality," said Musson. "Certainly that was evident with the rise of the Neuer Markt and now many of the stocks have come down too much.

One result of the fall in...

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