Some people are calling this upcoming century, the "BIOTECH CENTURY" based on the high hopes that biotechnology will provide great advances to help people live longer healthier lives.

Francis Collins, Chairman of the Human Genome Project, was recently quoted as saying "I think this is probably the most important scientific effort that mankind has ever mounted. That includes splitting the atom and going to the moon."

Last year a number of landmark articles were published describing for the first time scientist's ability to cultivate cells, known as pluripotent stem cells. These master cells of tissue development can be differentiated to become nearly any other type of cell in the human body, including heart muscle cells, liver cells and cartilage cells. This discovery gives great promise that cellular based organ repair and replacement is just around the corner.

Both genetic mapping and tissue engineering are sectors of the biotech industry that is entering a very exciting era. Genetic mapping will allow therapeutics to be targeted to the source of a disease. This can lead to more effective treatments with less side effects. Having a complete map of the human genome will allow scientists and physicians to have a guide to all functions of the human body at the cellular level for the first time, heralding an entirely new approach to fighting disease. These genetic maps will allow physicians to intervene to fight a disease before symptoms develop, at stage of development where treatment is more likely to succeed. In some cases complete cures may be possible by correcting the genetic flaw which caused the disease with gene therapy techniques. Tissue engineering has the potential to completely change the way doctors repair defective organs, by regeneration within the patient's own body with their own cells as tools.

Since it takes years for most biotech biologics or drugs to get to market, it is very difficult to establish valuations of early stage biotech companies. Some guidelines of insight of what to look for when evaluating and investing in biotech companies include:

Product Pipeline: Look for companies with at least two products under development and heading towards clinical trials. Product development strategies should be focused on speed to market and market leadership not basic research. Pipeline should be focused on a particular market population ie; people at risk of cardiovascular disease. Market focus is more important than technology focus.

Collaborations: Look for companies that have created alliances with industry partners and universities to achieve their goals. Companies should focus on the highest valued added portion of their product development and should outsource everything else. This focus is needed to succeed and to improve speed to market.

Management: Look for experienced management teams that have built successful companies before or have successfully managed product development to market leadership in the past.

Cash: Look for companies with low cash burn rates relative to their cash reserves. Companies that have utilized outsourcing to reduce their operating expenses. A safe company has two year's cash reserves.

Market: Look for companies that address large growing markets focused in a particular area ie; cardiovascular disease. Favor companies that control the relationship and branding to the ultimate end-use customers.

Technology: Look for a building intellectual property portfolio. Determine management has the experience to manage technology development projects. Look at firms focusing on the commercialization stage of development. Stay away from firms focusing on basic research. The best companies are focused on the therapeutic benefit of their products and are flexible enough to change "to whatever works" and "to work with whoever is working on the technology that does work", instead of being married to one technology platform developed by only one scientist.

Investing in biotech companies can be very risky. There are many unknowns. However, a prudent analysis of these companies following the above guidelines can reduce such risks.

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