A year ago the smart money was betting that the biotech industry in the U.S. was headed straight for a cliff. Analysts warned of "zombie" biotechs as shares of 70 biotech companies were trading for under a dollar and the financial crunch was getting ready to deliver the coup de grace to any developer that didn't have a fat bank account to fall back on. And there were plenty of those around.
Forbes' Matthew Herper remembers it all. Now, of course, biotech stocks have come back into vogue, after a fashion, and the rumors of the industry's demise have been dispelled by some remarkable comebacks. Herper puts much of the turnaround down to luck. And he spells it out in the tales of four biotech companies: Human Genome Sciences (HGSI), Vanda (VNDA), Jazz Pharmaceuticals (JAZZ) and Vermillion (VMLRQ).
In HGS's case, there was startlingly positive data from a late-stage lupus trial, which managed to take much of Wall Street's intelligentsia by surprise. Its shares are up 4,000 percent. Vanda shares soared 2,000 percent after it persuaded the FDA to change its position on a not-approvable letter and then did a sweet licensing deal. Jazz got jazzed by signs its narcolepsy drug, Xyrem, works in fibromyalgia. And Vermillion gets Herper's gold star for scaling down to a skeletal staff in bankruptcy, getting an approval on its OVA1 test and then restructuring its finances. And analysts say that as long as pharma remains hungry for deals, there are plenty of chances for investors to score just as big.
Wall Street being the fickle place it is, though, FierceBiotech had no trouble finding a cautionary voice. David Pinniger, a investment manager at International Biotechnology Trust, tells Reuters that small-cap biotech shares have become overvalued in the runup. Now he plans to sit back and let shares drop 20 percent before stepping back in.
In biotech, you pay your money and take your chances.
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