The biotechnology industry finished 2004 on a high note, with the NASDAQ Biotechnology Index (NBI) ending up 6.19% for the year. Unfortunately, the momentum failed to continue its positive course as the New Year began. Investors' worries about continued economic growth in the U.S. have weighed heavily causing oversold conditions in the marketplace. At the same time, Vioxx and Celebrex concerns still linger in the investment community and the FDA will probably scrutinize new products more heavily. Complicating the matter at hand is the possible proposal of revamping the FDA organization.

Despite the aforementioned concerns, advances were made in the fight against cancer and in multiple sclerosis. Then, there is the new California bond measure providing $3 billion dollars for embryonic stem-cell research and recent news regarding adult stem cells showing promise as a treatment for cardiovascular diseases. So there is a lot happening that is good.

But there are indications that the future of drug development lies in pharmacogenomics -- targeted, personalized medicines that potentially eliminate side effects and provide better treatment by using the genetics of disease and the way different people respond to disease. Personalized medicine is being developed and has the ability to work. So far, targeted cancer therapies such as Avastin, Iressa and Herceptin are the closest to personalized medicine, and are proof that such a model can be successful and profitable.

The biotech sector understands this, and our belief is that Big Pharma will follow through with acquisitions or joint ventures/alliances with biotech companies to replenish and improve their product pipelines. Along this line, Pfizer announced the $527 million acquisition of biotech Angiosyn Inc., a privately held biotech that develops novel proprietary biologics for controlling angiogenesis. And more recently, Schering-Plough announced acquisition of NeoGenesis, another privately held biotech that develops small molecule drugs. Thus, progress is being made along multiple fronts to develop novel drugs.



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