Despite encouraging signs of a rally in the last quarter of 2001, the biotechnology sector got off to a sickly start to the year. Biotechnology stocks were laid low by an attack of Enronitis, which was exacerbated by the unpleasant market side effects of Imclone's (New York) drug Erbitux and numerous phase 3 failures. However, although the initial public offering (IPO) window remained firmly shut, financing is still healthy, with companies raising $5.7 billion during the quarter. Analysts say it will take a run of good news—approval of some of the blockbusters pending review at the US Food and Drug Administration (FDA; Rockville, MD), for example—to restore investor's confidence in the sector and reopen the IPO window.
Over the quarter, biotechnology indices fared far worse than composite market indicators (see graph). The Nasdaq Biotech index fell 15% over the quarter, compared with just a 5% drop in the Nasdaq, and BioCentury 100 and Burrill & Company biotechnology indices dropped 19% and 18%, respectively. Andrew Clark, portfolio manager with Reabourne Limited (London), says European biotech indices fared worse: “Continental European companies have taken a real pounding ... companies [in Europe] are not as mature and neither is the investor base.” Over the quarter, the BioCentury London index (which contains 14 UK biotech companies) fell 22%, whereas BioCentury Europe (which contains 20 continental biotech stocks) fell 10%.
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