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Knocked Out by Nasdaq

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By Jennifer Friedlin

The Nasdaq has been about as unkind to genomics companies so far this year as it was kind to them in 2000. On January 23, genomics Judgment Day, the Nasdaq slashed from 202 to 76 the number of companies in its Biotechnology Index for failure to meet a handful of criteria. Among these companies were six members of the GTI: Compugen, DeCode, InforMax, Lynx Therapeutics, Rosetta Inpharmatics, and Variagenics.

While there are a number of reasons companies get knocked out of Nasdaq’s index, the removal of these six is likely due to one or more of the following: stock price fell below $10 a share, market capitalization dropped to less than $200 million, and/ or average daily trading volume slipped to fewer than 100,000 shares.

The end of the love affair with genomics stocks in general, and genomics technology plays in particular, coincides with another phenomenon: Suddenly every genomics company seems to be gearing up to do drug discovery. At the JP Morgan H&Q Healthcare conference in San Francisco in January, many a genomics technology company talked about using its tools to find cures and prevent disease. While investors seemed enamored with anything genomic in 2000 — software, databases, or Web portals — this year it appears they care only about where the next blockbuster drug is going to come from.

Whether all these companies will be able to walk the walk as well as they talk the talk is doubtful. Meanwhile, they can try to impress investors by doing whatever it is they originally promised and meeting their earnings targets along the way. With earnings-report season now underway, perhaps some positive news about bigger revenues and lower-than-expected losses will provide a silver lining to the otherwise dark cloud hanging over the genomics market.

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