The best of times, the worst of times?

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After a grim year of sliding share values in 2011--the biotech sector was down a median 25%--early 2012 has seen a big improvement in stock performance, according to some figures reviewed in a buy-side panel discussion at the BIO CEO & Investor Conference in New York Monday. And in a new BIO survey, a slight majority of investors said they believe this is a good time to invest in biotech and think we'll see more IPOs this year than last.

For Fidelity fund manager Rajiv Kaul, the black cloud that lingered last year had a distinct silver lining to it. European instability triggered havoc in the markets, making some of the companies he follows a great buy. Add in rapidly plunging sequencing prices, and Kaul sees a new era dawning of better drugs coming from companies with a lengthy period of market exclusivity to look forward to, creating the right environment for biotech to thrive in.

Alex Denner, Carl Icahn's former right hand man in the biotech game who's now out raising cash for his own hedge fund, gave a thumbs-up to the arrival of new treatments tied to diagnostics, agreeing that these were "extremely exciting" times, though he also noted that the companies that really capture his interest tend to be poorly run but capable of executing a quick turnaround.  

Diamondback's Greg Martinez joined the cheering section with his belief in a "great long-term, 5-year outlook." The recent $11 billion Pharmasset ($VRUS) buyout, he noted, "shows you really how much value you can create" in biotech.

Only when the conversation turned to Deepa Pakianathan, who handles the biotech investing at Delphi Ventures, did the conversation begin to hit on some bleak perspectives. Except for a handful of biotech companies, she noted, most were on "the dark side of the moon." There may be good reason for long-term optimism, she says, but new company creation is largely restricted to Boston these days, driven by a few active venture groups backing upstart developers.

Pakianathan clearly isn't a fan of the FDA, either, citing regulatory issues that are clearly chilling the field. She noted that one of her portfolio companies, the diabetes drug developer Phenomix, was forced to shut down after the biotech found itself faced with demands for a study that would have cost hundreds of millions of dollars. The Phenomix failure wiped out $200 million in investments.

"I think the FDA should challenge itself to do better," agreed Kaul. A regulatory review for an NDA should run about 10 months on average. But the CEO of one company with 7 approvals to its credit says it took more than twice that amount of time, making the agency a major roadblock for companies trying to drive a new product to the marketplace.