The Flight to Size

A year ago, buysiders shifted their interest toward companies developing products and away from toolkit companies. The shift in the interim has been even more profound, not just toward companies with potential products but toward companies with real products, real earnings and significant market capitalization. In other words, the buyside is finally treating biotech like a real industry. The change could leave some existing public companies as orphans (or casualties), but the ultimate outcome is likely to be a healthier sector ready for the prime time of the public markets.

Buyers of biotech stocks are increasingly moving to companies over $1 billion in market cap and those that are profitable or likely to become so in the near term with significant product revenues. The shift may reflect a fundamental change in the public markets, as investors put their money in "blue chip" biotech stocks yielding pharmaceutical industry-like returns rather than venture-stage companies with higher risk...