| BUSINESSWEEK ONLINE : DECEMBER 11, 2000 ISSUE | ||||||||
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| INTERNATIONAL -- EUROPEAN BUSINESS
Biotech Is Back--but the Prognosis Is Iffy (int'l edition) A mini-boom could start running out of steam The great dot-com collapse has taught European investors that buying stock in initial public offerings can be a brilliant way to lose money. But European money managers have at least one consolation: stocks in local biotech companies, many of which went public recently, are up 60% for the year. Some biotech plays have returned 500%. The big question now is whether the Euro biotech boom, which mirrors developments in the U.S., will start running out of steam. ''Some of these companies have experienced a bit of volatility lately,'' says Nick Woolf, senior biotech analyst at ABN AMRO Bank in London. Woolf thinks the outlook remains positive, but there's no denying the biotech sector has gotten choppy in the past few weeks. One IPO in Britain shows the promise and peril of this market. On Nov. 16, ReNeuron Ltd. debuted on London's Alternative Investment Market (AIM), London's high-growth exchange, in a much-anticipated and oversubscribed offering that raised $28 million. Yet two weeks later, the stock is now about 7 cents below its offering price of $2.80. HOW BIG? ReNeuron's technology also looks promising but risky. The company, founded by three scientists from London's Institute of Psychiatry in 1997, has no sales, and lost around $4.3 million last year. Yet it's working in an area--research to regenerate cells and reverse cellular damage--that's supposed to be the next big thing in biotech. How big, of course, depends on what practical applications finally evolve. ReNeuron is working on a brain repair kit using human brain stem cells, the parent cells that produce all the cells in the brain. Because the cells are able to divide for only a limited amount of time, humans gradually lose them. ReNeuron claims it has found a way to immortalize these neural stem cells, enabling them to divide endlessly. Once injected into the brain, they automatically migrate to any damaged area and begin to replace and repair disease-damaged cells. The technique is in pre-clinical testing, and the hope is it will enhance the treatment of strokes, Parkinson's, and Alzheimer's, according to ReNeuron's co-founder and head of scientific research, John Sinden. Yet the process is surrounded by controversy, because stem cells are normally obtained from aborted fetuses. To date, fetal tissue has been used successfully in U.S. trials to treat a few Parkinson's patients, but several fetuses are required to treat each patient. ReNeuron and rival U.S. companies are trying to find a way around this ethical problem. ReNeuron's scientists treat the stem cells with a gene that enables the cells to divide indefinitely as long as they are kept below body temperature. Once transplanted in the brain, the cells rise to body temperature and the division process immediately stops, preventing what would otherwise result in the formation of a tumor. This thermostat gene allows ReNeuron to mass-produce brain cells in the lab--which the company's founders see as a big advantage over rivals. ''Effectively, thousands of patients can be treated with cells derived from a single sample of fetal tissue,'' says ReNeuron CEO Martin Edwards. ReNeuron's cells have been tested only on rats suffering from stroke: The stem cells, implanted in the brains of the afflicted rats, do reverse some damage to motor and sensory nerves. The company hopes to begin human clinical trials next year. The eventual goal is to mass-produce enough cells to treat 1,000 patients per week. SMALL CHANCE. But it's a long way from here to there. Pro-life groups, especially in the U.S., are likely to oppose the therapy, even though ReNeuron's method greatly reduces the amount of fetal tissue needed. And the costs of bringing the drug to market will be huge. The company has already invested $9 million since 1997, and it is likely to take an estimated $100 million and seven years for clinical testing before the treatment is approved for use. ReNeuron is hoping to partner with a major drug company with expertise in the central nervous system to develop the therapy. But even with a serious partner, getting past early stage clinical testing isn't a given. ''There's about a 10% chance of getting a product to market,'' says biotech analyst Andrew Forsyth at Williams de Broe Securities. Even ReNeuron's research director is reluctant to overhype the company's potential. ''Brain damage is very complex, and simply restoring lost brain cells is not a total cure,'' Sinden says. But investors who piled into the offering were already wildly optimistic. And they can get burned by serious biotech companies as well as fly-by-night dot-coms. By Kerry Capell in London _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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