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January 01, 2010 (Vol. 30, No. 1)

Renewed Vigor Could Be Hallmark of 2010

Year of the Tiger Predicted to Bring Fresh Energy and Stamina to Biotech Sector

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    Robert B. Dellenback

    Last year at this time we celebrated the end of 2008, the Year of the Rat, and looked forward to change for the better in 2009, the Year of the Ox. For a Westerner curious about Eastern tradition, the rat and the ox descriptions fit: 2008 was a year happily escaped and 2009 was going to require a lot of hard work. Now, facing 2010, the Year of the Tiger, what is in store for biotech entrepreneurs?

    A handful of 2009 events provides some insight into what lies ahead.

    • The value of publicly traded biotech stocks has solidly recovered, indicated, among other things, by the Amex Biotechnology Index reaching the highest point in the Index’ history in the second half of 2009.
    • The combinations of Johnson & Johnson (JNJ) and Wyeth; Merck and Schering-Plough; and Roche and Genentech early in 2009 foreshadowed active merger and acquisition activity.
    • Two biotech companies, private equity backed Talecris Biotherapeutics and venture-backed Omeros, went public in the fourth quarter of 2009, the first significant biotech IPOs since November 2007.
    • Biotechnology remains a favored sector for private investors.
  • Energized Public Market

    Publicly traded biotechnology stocks rebounded in mid-2009 from the correction of late 2008 and early 2009 and have remained solid, at or above historic levels through the beginning of December. The Amex Biotechnology Index shows year over year increases from 2003 (lowest closing price, $321.00) through early December (closing price of $909.45 on December 4, 2009).

    The Index price reached $800 in July 2009 and hit $925 in the third quarter of 2009, the highest point in the Index’ history. To put this in context, the Index traded between $650 and $840 in 2006 and 2007 and between $596 and $864 in 2008. The Index has been more volatile in the past two years than in previous years, but since July, it has remained above $820. It has consistently outperformed the Nasdaq, Dow, and S&P 500 since mid-2005. While not predicting the outcome for a particular company or industry segment, the strength of this Index reflects regained energy and stamina that are likely to provide opportunities for innovation and growth in 2010.

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