Making Money in Technology
After the Bubble, page 20
Biotech
With the publication of the human genome, biotechnology—and the companies created to exploit the advances
in biotech—have entered a new era. Modern biotech companies look more like computer companies than they
do traditional biology concerns. For example, Celera’s primary current product consists of genomic databases
and interpretive tools for these databases.
Biotechnology companies based on solid science have a good long-term future. (These comments do not apply to
pseudo-science penny biotech stocks.) However, these are not companies with short-term trajectories.
Usually, they have little prospects for current revenues. It can be many years before research bears
fruit with drugs that can be shepherded through the regulatory process.
This means that short-term perturbations in the capital markets have little impact on the real future of
biotechnology companies. (Well-run companies do try to bulk up on financing in boom times.) Biotech stock
prices peaked in early 2000. But both the biotech boom and subsequent crash are not hugely significant
in and of themselves. Rather, they reflect our psychological attitude towards businesses that will be
important—financially, and in terms of improving our lives. When we’re feeling good about the world,
and ourselves, these stock prices are high. When we’re not feeling so good, prices are lower. But the
intrinsic value is unchanged.
It is said that the market is a manic-depressive. Sometimes this manic-depressive offers you stocks at
extremely cheap prices. At other times, the manic-depressive offers to buy stocks you hold for lots
more than they are worth. If you pick a few biotechnology companies in which you are confident of the
science and the management—perhaps Celera (NYSE: CRA), Human Genome Sciences (NASDAQ: HGSI), Immunogen
(NASDAQ: IMGN), and Millennium Pharmaceuticals (NASDAQ: MLNM)—you can hold them for the longterm and do
very well. You can also trade them based on the psychology of the market—sell when people are feeling
good, buy when people are feeling bad.
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