Biotech Sector Unlikely to Resurge in Near Term, Genentech CEO Says

Investors unsettled by the rout in biotechnology stocks in recent months may have to get used to it, a leading industry executive said.

Genentech Chief Executive Arthur Levinson said biotech stocks are unlikely to resume “the rocket climb, at least in the near term.”

Advances in the understanding of human genes won’t necessarily translate into shorter development times for new drugs, Levinson warned at the J.P. Morgan H&Q; health-care conference in San Francisco.

Biotech research productivity has failed to improve significantly so far, despite increased research spending, he added.

Shares of Genentech (ticker symbol: DNA) fell $4.63 to $62 Monday. The company is the world’s second-largest biotech firm, and it has one of the richest pipelines of drugs in the industry.

The Amex biotech stock index slid 5.3% Monday.

Levinson also said stock valuations and the need for capital will accelerate the pace of industry mergers. The biotech industry could require an estimated $3 billion in capital to fund research and development and other spending this year, he said.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Battered Biotech

As a group, biotechnology stocks recovered from their spring sell-off and went on to post new highs by late summer. But in recent months, the sector has been hammered again with the general plunge in tech-related stocks. The Amex index of 17 major biotech stocks fell 5.3% Monday to its lowest since June.

*

Monthly closes and latest for the Amex biotech stock index

Monday: 505.24

Source: Bloomberg News