The latest biotechnology boom is over, and now it is time for the fall. And here is the evidence: fifty-six percent of the 471 companies within the broad biotechnology/drug industry sector finished their most recent financial quarter with less cash in hand than they had this time last year. Now, biotechnology (as well as its investors) is accustomed to weathering years of heavy spending, but it is not used to the majority of its siblings feeling the pinch. Many of that majority—265 firms—could become bankrupt or be sold for much less than investors paid. Biotechnology may suffer a slower and less visible collapse than that of the recent dot.com and telecom busts, but it will happen.
It all comes down to simple economics: venture capital and investor enthusiasm for Internet commerce led to a flowering of dot.coms. In turn, those e-business startups paid telecom companies richly for networking equipment. But the façade all came tumbling down when dot.coms found that they were chasing the same customers, and only the largest and best managed—eBay, Amazon, Yahoo—could survive. And as more headstones filled the dot.com graveyard, telecom suppliers began to collapse too. WorldCom is the largest and most recent fatality.
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