Linda I. Miller, vice president for biotechnology research at Paine Webber Inc. in New York, last month told a seminar at The Brookings Institution here that the biotechnology industry has seen its risk factors decline and opportunities increase following the "turmoil and trauma" of 1983-85 period, during which its stock prices fell an average of 70 percent from their 1983 peak.
The industry is healthier now, Miller said. Patents on biologically engineered products have been upheld by the courts, a diverse assortment of products is reaching the market, and the field is maturing as biotech companies establish ties with larger corporations and the competitive fever begins to subside. After losing about $70 million in 1985 and an estimated $450 million last year, Miller said, the industry this year could break even for the first time.
Stock prices of the 50 or 60 publicly traded biotech companies have risen in the first two months of the year an average of 30 percent—or nearly twice the pace of the Dow Jones Industrial Average. The growth has not been uniform, however.
"It's obviously a volatile industry in terms of stock prices," said Munro Pitt, a securities analyst who tracks biotechnology companies for Shearson Lehman Bros. in New York. Prices often fluctuate wildly following the latest headlines about research advances or licensing setbacks.
After being wary of biotech stocks last year, Pitt said, "we changed our opinion early in January to a more positive outlook for the year." With many biotech products now in clinical trials and expected to be marketed soon, he said, "we thought [the sector] would outperform the broader market."
Much attention is being focused on Genentech Inc., the maker of tissue plasminogen activator (TPA), which dissolves blood clots. The Food and Drug Administration is expected to approve TPA within a few months. "Everyone is waiting to see big sales come through in the second half of the year," Pitt said.
Misha Petkevich, senior biotech analyst at Hambrecht & Quist, said the anticipated "blockbuster" sales of TPA "will probably result in the development of a major pharmaceutical company from what was a fledgling biotech company a few years ago." Added Pitt, "We're seeing the industry evolve into an actual moneymaking sector."
Not every firm will be a success, however. "There'll still be quite a few companies in serious financial trouble," noted Mark Hughes, a consultant with Boston Biomedical Consultants. He said Monoclonal Antibodies Inc., for example, "is really struggling" after its ovulation test kit marketed by Ortho Pharmaceuticals was withdrawn from the market. Other companies are having trouble obtaining FDA approval for their products.
The FDA approved four biotech products in 1986: two forms of alpha interferon, a hepatitis B vaccine and a monoclonal antibody to prevent rejection of transplanted kidneys. Total product revenues for the industry were in the neighborhood of $450 to $500 million, according to Miller—a figure that some analysts expect almost to double this year.
Not all observers are so optimistic. Although prospects for the biotech industry are improving, Hughes said, "in general, the types of sales they're projecting just haven't happened. I don't think it's going to be a gold rush, especially in the near-term. Products are going to trickle out very slowly."
U.K. AIDS-Related Stocks Soar
LONDON—increasing attention on AIDS has triggered brisk activity on the London Stock Exchange as investors rush to buy shares in companies known or believed to be studying possible treatments, as well as those with interests in condoms, blood banking and laboratory testing facilities.
The company most affected has been Wellcome, whose U.S. subsidiary, Burroughs-Wellcome Co., has reported some success with Retrovir (AZT) in combating AIDS symptoms. On February 25 the price shot up 42 pence to 521 pence ($8.23) as 9.9 million shares traded hands. Its price had doubled in less than a month.
Much of the buying came from Japan, as had been the case in an-other price surge in Wellcome stock two weeks earlier. The price then rose 74 pence to 374 pence following a company announcement that it would charge $188 for boxes of 100 Retrovir capsules, and after an announcement at a Tokyo conference that Wellcome hoped to test the drug against a related condition, adult P-cell leukemia, of which there are an estimated I million carriers in Japan.
Preoccupation with the disease continued February 26, when shares in the chemicals group BTP soared 73 pence to 235 pence ($3.71) after the company announced that one of its products, Nipacide, was "capable of killing the AIDS virus outside the human body, and therefore disinfectants based on this product can be used in environmental control of AIDS." By the next day, some investors seem to have responded to BTP's careful warning that Nipacide "was not a cure or a treatment for AIDS" and that "there is no evidence of the environmental spread of AIDS." The share price that day fell back to 195 pence.
Wellcome shares later fell somewhat as well, but rose again 69 pence March 6 to finish at 492 ($7.77) following the British govern-merit's approval of a product license for Retrovir.