The month is May and our theme is money. But considering how the market looks these days, you might wonder if there aren’t more important questions to be asking the financial experts than “Tools or Targets?” Perhaps something more along the lines of, “How many genomics companies have a future?”
To be sure, the news in recent weeks has been gloomy for the sequence analysis set. We’ve seen downsizing at DoubleTwist, Lion Bioscience, and NetGenics. Amersham Pharmacia Biotech has stalled its IPO, as has Double-Twist. And Steven Newby’s $22 million GenomicsFund.com, which sticks strictly to genomics stocks, was the worst-performing healthcare fund of the first quarter.
The stocks of many public genomics-sector companies have hit all-time or 52-week lows (see the GTI p. 42). While the small fry and still-private are being forced to rethink their business development and fundraising strategies, even Applera CEO Tony White has lost his cool — during an analysts’ teleconference he lashed out at investors over the plummeting value of his company’s shares.
Successful private financing rounds — the $100 million and $45 million that Perlegen and Xenon raised, respectively, and the $85 million that Myriad managed to elicit from Hitachi, Oracle, and Friedli Corporate Finance for a proteome project — are exceptions to the rule. Instead, more VCs are talking about “down rounds” (follow-on financings in which companies discount their valuations).
In his recent Trendspotter column on GenomeWeb .com, investment banker Ira Leiderman urges CEOs not to despair. The market will recover sector by sector, he predicts, and healthcare, including genomics, will be one of the first to emerge from the ashes. Nevertheless, “Company values have been reset for the foreseeable future and you will have to learn to live with this reality,” Leiderman warns.
Many industry observers say these reduced valuations are more in line with reality, but it would appear that trendy genomics stocks are also suffering guilt by association with the dot-coms. A Motley Fool financial columnist suggests that there’s no reason average investors should own stock in genomics companies, which he lumps in the same risk category as dot-coms and business-to-business e-commerce. For a piece of genomics action, buy big pharma instead, he advises.
At the risk of jinxing ourselves, we hold up the current issue of Genome Technology as evidence that genomics companies are in nothing like the danger dot-coms are: While magazines such as Red Herring and the Industry Standard, which have relied on dot-coms for ad pages, aren’t landing on your desk with the thud they once did, companies with genomic technologies to tout have enabled us to deliver to you our thickest issue yet. And all signs at GenomeWeb.com point to mounting interest in the sector: Our site recently hit the half-million-page-views-per-month mark.
Genomics- and proteomics-technology analyst Scott Greenstone says that with the exception of Applied Biosystems, which has acknowledged softening instrument sales, declining genomics stock prices have nothing to do with companies’ promise and everything to do with general market performance. Unshaken, he’s predicting a long growth cycle for proteomics technologies.
In fact, back in March when we interviewed Greenstone and five other financial experts who appear in this month’s cover story, we didn’t bother asking them to speculate on current market conditions. We figured that by the time this issue reaches your hands, the sector might already have bounced back.
Adrienne Burke, Editor in Chief