BioCentury
ARTICLE | Finance

Ebb & Flow

May 20, 2002 7:00 AM UTC

Back in February, a table in BioCentury showed how much value would be lost in big cap biotech if the group's price-to-earnings multiples contracted to those of big pharma (see BioCentury, Feb. 19). At the time, it was hoped that the table would be merely illustrative. However, the biotech multiple on 2001 EPS has fallen to 37 from 45 at the time, while the P/E for big cap pharma has remained at 25, where it was at the beginning of the year.

Indeed, at the start of the year, the biotech multiple was 49. The contraction raises the question of whether investors are becoming unwilling to pay more for a dollar of biotech earnings than they were in the past, or whether this is just a short-term phenomenon that will right itself along with an uptick in the equities market (see "Multiple Contraction", above). ...