Investment in biotechnology is a difficult thing to read, given the timing of the big run-up in biotech stocks and the sudden drop-off last year. Did the promise of a fully sequenced human genome drive the late- 1990s boom? Was last year an indication that the genome was a bust? Perhaps investment was primarily guided by news about Martha Stewart. Or was biotech basically tethered to the dot.coms and telecoms in the big bubble that burst on Wall Street two years ago?

	Duyk EXELIXIS PHOTO

Perhaps all of the above--except maybe the part about the genome falling flat. At any rate, investment in the life sciences sector, including biotechnology, genomics, and drug discovery, has rebounded in recent weeks.

"After months of fear, skepticism, and risk aversion, investors are regaining an appetite for biotech stocks," G. Steven Burrill, chief executive officer of investment banking firm Burrill & Co., said when releasing the firm's Burrill Biotech Select Index for April--a breakthrough month with the index up 8%. Good news on earnings and products under review at the Food & Drug Administration has pushed stock prices up further. The Burrill index shot up 21% in May, followed by a 3% rise in June.

Venture capital is upping its commitment to the sector. MPM Capital closed its $900 million BioVentures III fund last December, bringing total finance to $2.1 billion. Schroder Ventures Life Sciences announced the closing of its third life sciences fund with commitments totaling $402 million in June, bringing the firm's life sciences investment funding to $900 million. "Our aim is to invest and create value in companies with strong management, scientific capabilities, and good future growth prospects," says Kate Bingham, a general partner in Schroder's life sciences group, "and there is no shortage of U.S. and European life sciences companies that meet these criteria."

Geoffrey Duyk, president of R&D and chief scientific officer at drug discovery firm Exelixis, says a renewed bullishness stems from positive news from the American Society of Clinical Oncology's annual meeting in May regarding new therapies, recent drug approvals, successes in the clinic, and the current overhaul of the approval process at FDA.

Sources agree that positive news about Genentech's colorectal cancer drug, Avastin (bevacizumab), was a singular shot in the arm. Genentech reported in May that the drug achieved all primary and secondary efficacy end points in Phase III trials.

Peter Young, president of investment banking firm Young & Partners, says the market is coming back "along certain themes." Investors are generally risk averse when approaching the sector now and will gravitate to companies with products on or close to the market.

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