Clicking on banner ads enables JWR to constantly improve
Jewish World Review March 28, 2001 / 4 Nissan, 5761

James K. Glassman

Jim Glassman
JWR's Pundits
World Editorial
Cartoon Showcase

Mallard Fillmore

Michael Barone
Mona Charen
Linda Chavez
Greg Crosby
Larry Elder
Don Feder
Suzanne Fields
James Glassman
Paul Greenberg
Bob Greene
Betsy Hart
Nat Hentoff
David Horowitz
Marianne Jennings
Michael Kelly
Mort Kondracke
Ch. Krauthammer
Lawrence Kudlow
Dr. Laura
John Leo
David Limbaugh
Michelle Malkin
Jackie Mason
Chris Matthews
Michael Medved
Kathleen Parker
Wes Pruden
Sam Schulman
Amity Shlaes
Roger Simon
Tony Snow
Thomas Sowell
Cal Thomas
Jonathan S. Tobin
Ben Wattenberg
George Will
Bruce Williams
Walter Williams
Mort Zuckerman

Consumer Reports

Whereís The Profit In Biotech Future? --
LARRY ELLISON, founder and chairman of software giant Oracle, says that heíd go into genetic engineering if he were starting out in business today. Silicon Valley venture capitalist John Doerr may have made a fortune investing in computer and Internet companies, but he tells his daughter to study medicine. Michael Milken, perhaps the shrewdest financial mind of our time, says that just as the 20th Century was the century of physics, the 21st will be the century of biology.

Lots of really smart people believe that the most exciting technical advances in coming years will come from biotechnology. The mapping of the human genome has given all of us hope in the fight against deadly diseases, and the commercial possibilities seem almost as intriguing. The problem for investors is figuring out which companies are likely to deliver effective therapies and consistent earnings.

Many biotech companies lose money for years while they attempt to push a candidate drug all the way through the approval process at the Food and Drug Administration. Many never make it, and, in any case, itís extremely difficult to pick the winners in this high-stakes game of hit-or-miss. An alternative strategy is to invest in companies that provide products and services to biotech companies. If you donít want to guess whoís going to cure cancer, but you believe that a lot of money will continue to flow into the search, think about investing in the people who outfit the cure-hunters.

Itís a tried-and-true strategy of profiting from a gold rush Ė selling picks and shovels to the miners. As a matter of fact, Levi Strauss got rich selling its blue jeans to 19th Century fortune-seekers in California. More recently, companies like Cisco and Sun Microsystems made fortunes selling tools to people chasing the Internet dream. How do you make money on the Internet? Online merchants and publishers still arenít sure, but they bought a lot of Sun and Cisco gear trying to figure it out. In the last year, of course, these two stocks have been taken out and shot by investors as tech customers cut spending, but long-term holders have been rewarded handsomely.

Investing in suppliers to biotech firms isnít sexy Ė none of these companies will change the world. But they may be able to ride a wave of spending on medical research. Among the more established firms in this arena are Becton Dickinson (BDX), Beckman Coulter (BEC) and Apogent Technologies (AOT). They make thousands of products used in modern medical research, from robots that automate laboratories to special furnaces to the plastic ware and other equipment used to culture cells, as well as more high-tech products for analyzing human and animal tissue. Applied Biosystems (ABI) is a tracking stock for the part of Applera Corp. that makes gene-sequencing machines. In fact, ABIís machines were used to map the human genome.

All four of the stocks mentioned above trade at reasonable price/earnings ratios but may not have the upside potential of some smaller, younger companies. Still, the large firms represent a solid way to anticipate large spending on medical research. Among the more aggressive investments, Affymetrix (AFFX) and Molecular Devices (MDCC) are focused on more high-tech products to analyze cells.

One company I find particularly intriguing is Albany Molecular Research (AMRI), which provides drug discovery and development services, chemistry research and manufacturing for a growing number of biotech and pharmaceutical companies. This may not sound like the cutting edge of biotechnology, being the contractor for innovative companies, but AMRIís customers obviously place a high value on its services. In calendar year 2000, Albany squeezed $24 million in earnings out of its $67 million in revenues. Those numbers represent a 71 percent increase in earnings and a 200 percent increase in revenues for the year. Little wonder that AMRI ranked No. 2 on Forbes magazineís most recent list of Americaís 200 best small companies. And itís not hard to believe that the demand for medical research services will continue to grow.

JWR contributor James K. Glassman is the host of Tech Central Station. Comment by clicking here.


03/22/01: The Joy of Debt: The last thing we should want is a U.S. Treasury flush with cash
03/19/01: 'Defensive' Stocks in the NASDAQ
03/15/01: Bush administration must say no to Jane and Kyoto
03/08/01: Time to buy small caps? Consider these five great techs
03/01/01: Billís and Larryís continued political adventures
02/26/01: Chips on the Dips?
02/23/01: How Tauzin Can Keep His Word And Stop Telecom "Remonopolization"
02/13/01: Consumers, WAKE UP! Middlemen are ripping you off
02/02/01: Publicity-Seeking Politicians and Contingency-Fee Lawyers Corrupt the Law
01/26/01: DoubleClick, eBay And Their Promising Ilk
01/24/01: Will Cyberspace Look Like France or America?
12/27/00: Cut interest, taxes and regulation to save high-tech economy
12/20/00: Close, But No Big Czar
12/15/00: A Down Year? Maybe. But Letís Put It in Perspective
12/13/00: Clintonís sorry midnight race into history
12/07/00: Is Telecomís Future The Bells, The Bells, and Only The Bells?
12/01/00: Money talks and walks in election aftermath
11/29/00: Climate Treaty Deadlock Shows Lack of Consensus and Common Sense
11/23/00: Climate change participants donít listen to reasons for uncertainty
11/21/00: Will Regulators Create a Recession?
11/14/00: The Election and the Market
10/26/00: Hang on for the long term
10/25/00: On privacy, one size doesnít fit all
10/24/00: Perish the bearish thought
10/19/00: Beating hunger --- the biggest prize
10/13/00: Way to play biotech
10/12/00: Bush vs. Gore on Technology
10/11/00: Global Climate Scare: Fools Rush In
10/05/00: Avoid the Apple Trap
10/03/00: Goodbye, anti-Microsoft crusader --- and good riddance
09/29/00: Should You Invest in Tech IPOs?
09/27/00: Could technology end airline delays?
09/22/00: Donít Forget Small Caps
09/20/00: Is the New York Times Rooting for Disaster?
09/13/00: The Best Argument Against Net Regulation
08/30/00: Political Risk in Big Drug Stocks
07/27/00: Tech Dividends
07/25/00: Government Privacy Violators
07/20/00: If I Had to Pick One Tech Stock
07/18/00: Our Favorite Lawsuit
07/13/00: Silicon Valley East
07/11/00: Election 2000: Year of the Investor Class?
07/07/00: Adventures on the
07/06/00:The Difference Between Bill Gates and Larry Ellison
06/29/00: In the Chips
06/27/00: Free market wins in Federal Court!
06/22/00: Wireless Bargains?
06/20/00: Is Your SUV Warming the Planet?
06/15/00: Shopping for Government
06/13/00: Top 10 Tech Stocks
06/08/00: Riding the eBook Wave
06/06/00: "The Last Mile"
06/02/00: Keep Buying!
05/31/00: Who Asked the FTC to Regulate Online Privacy?
05/25/00: "When Itís Time to Sell"
05/23/00: End the "Telephone Tax"
05/16/00: Time Warner Gets a Bad Rap

© 2000, Tech Central Station