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Biotechs Get Bashed Again, but Backers Aren't Backing Down

Calls for cheap access to genetic data hit shares today; indices are 30% off highs reached this month.

For some, Tuesday saw another sickening slide in a volatile sector. For others, it was the day biotech simply became buy-o-tech.

Companies spanning the biotech world -- from genomics to monoclonals to antisense and gene therapy, from the mighty

Amgen

(AMGN) - Get Report

to the tiniest

Magainin

(MAGN)

-- contributed Tuesday to the sector's biggest one-day dive in months, prompted by government calls for cheap access to a growing mountain of genetic data. The

Nasdaq

and

Amex

biotech indices each dropped 13%.

The selloffs, topping 30% in intraday trading in some cases, appeared as indiscriminate and therefore as baffling as the huge run-ups that preceded them, experts say. After all, it had been known all along that data from the

Human Genome Project

-- the giant public-private effort to map the human genetic makeup -- was slated for release to researchers in coming years. And that had biotech analysts cautioning investors not to sell first and ask questions later, despite the weeklong

slide in the once-hot stocks.

Political effect

Tuesday's selloff apparently was prompted when President

Clinton

and British Prime Minister

Tony Blair

called human gene mapping "one of the most significant scientific projects of all time" and said proceeds of the project should be freely available.

Companies hard-hit included

Incyte Pharmaceuticals

(INCY) - Get Report

, off 53 1/2, or 27%, at 143 1/2;

Celera Genomics

(CRA)

, off 41 3/4, or 22%, at 147 1/4; and

Human Genome Sciences

(HGSI)

, off 29 3/64, or 19%, at 123 33/64. All of those firms are mining and selling human genetic data to big drug companies to make new drugs.

But oddly, companies that could benefit from easy access to data, such as drug developers

Vertex Pharmaceuticals

(VRTX) - Get Report

,

British Biotech

and

Cephalon

(CEPH)

, also took serious hits, dropping 15%, 17% and 15%, respectively.

James Fiore, president of the Boca Raton, Fla.-based

Life Science Group

TST Recommends

, a boutique biotech investment adviser, says that's evidence that "a good portion of trading is from people who know very little about what they are buying and selling."

'Irrelevant'

Despite the selloffs that have taken the major sector indices some 30% off their highs of this month, biotech's fans remain steadfast.

"It's irrelevant," Eric Hecht, biotech analyst with

Merrill Lynch

, says of the U.S.-U.K. statement. Hecht predicts the sector will recover and tells clients to "buy a couple of the high-quality names that are falling in the downdraft," such as

Medimmune

(MEDI)

, off 12% Tuesday, and

Idec

(IDPH)

, off 10%.

Others were even more opportunistic. Hey, if your local

Wal-Mart

is having a 30%-off sale, why ask why?

"There are three options in a market like this," says Sam Isaly, partner in

OrbiMed Advisors

, a New York-based biotech fund manager. "Sell everything. Do nothing. Or buy. We chose the latter."

Isaly, a buyer of stocks including

GelTex

(GELX)

and

Pathogenesis

(PGNX) - Get Report

, is a biotech believer. While hype and biotechnology often go hand in hand, the 25-year-old industry does have a few things going for it, like, increasingly, profits.

The P-word previously almost never fit into the invest-in-biotech equation, except for industry granddaddies like Amgen,

Chiron

(CHIR) - Get Report

and

Genentech

(DNA)

. Now Isaly predicts that nearly three dozen more biotechs will report profits in 2002. That's in an industry where four out of five show losses.

The Longer View

Also, free access to genetic data "makes biotech businesses cheaper and more efficient to operate," says Fiore, who recommends stocks including

Genzyme

(GENZ)

, Chiron, Vertex and

Creative Biomolecules

(CBMI)

, all of which are developing new medicines or vaccines.

Others voice support for genomic data-mining companies that will face competition from wider public access to genetic data, such as Celera, Human Genome Sciences and Incyte. That's because those companies already have built a market selling data to the dozens of drug companies falling over each other to find and patent new medicines -- long before the Human Genome Project files become public.

"We've known for some time the raw data would become available through the Human Genome Project," says Dennis Harp, biotech analyst with

Deutsche Banc Securities

. "And drug companies are still entering into collaborations with Incyte" and others.

"I don't think this selloff will last," adds Harp, whose bank has advised Incyte in recent years. "Investors will recognize that there is considerable fundamental value in the sector."