Everywhere you look this spring, there are signs of bubbly enthusiasm for technology. Microsoft just paid $8.5 billion for a company that isn’t profitable. Facebook has racked up more than 600 million members around the world. LinkedIn is teed up to go public this week at a valuation of more than $3 billion.
It may be hard to remember, but the history books say there was once a time when broad swaths of the American public got that fired up about biotechnology. I’ve now been writing about the industry for 10 years, and have never encountered that feeling myself. The only biotech industry I’ve ever known is populated by a small group of hard-core specialists. When I venture outside biotech circles and tell people I write about new biotech drugs, devices, and diagnostics, I usually get greeted with a blank look. I’ve learned the best option is either to pass the celery sticks, or change the subject to something popular, like Facebook, or something else I may have in common with the other person, like being a fan of the Green Bay Packers.
There are good reasons biotech lives in such a zone of public indifference. The industry has overpromised and underdelivered since its beginnings in the late ’70s. The investing public has learned, appropriately, to be skeptical of claims about revolutionizing medicine. Drug development is way more risky, requires more money, and takes a lot longer than anybody realized back in the early days. Even when a new biotech drug does make a big difference, it only really affects people with a certain disease, and maybe their family members, so it never enters the vast sea of pop culture awareness (except, perhaps, for Viagra).
All of this collective indifference has consequences for the industry. When an industry shrinks down to a small core of specialists, you naturally see little appetite for new IPOs among generalist investors who control most of the capital on Wall Street. And the lack of an IPO market makes it difficult for biotech companies to gain negotiating leverage they need to sell their companies for a mint to Big Pharma. When biotech fails to captivate the public imagination, it can’t get good returns for venture backers, and companies have to slash their payrolls, and, often, their ambitions.
The return of investor enthusiasm for tech has made me wonder whether there are any signs that biotech might, just might, ride the tech industry’s coattails. The verdict isn’t in yet on that question, but there are some signs of a modest (let me repeat, modest) renewal of interest in biotech.
This year, biotech/healthcare specific mutual funds have seen more capital flowing into them, rather than out, for 16 of the first 19 weeks of 2011, according to a report last week by Chris Raymond, an analyst with Robert W. Baird in Chicago. More than $2 billion of new investment capital has flowed into biotech/healthcare specific mutual funds this year, with more than half of that coming in the past two weeks, Raymond said. Investors apparently have noticed that biotech stocks are doing
