Executive Summary

Euphoria reigned at the Chase H&Q annual health care conference. Biotechs that seemed unable to buy an audience last year presented to rooms so crowded that breathing itself was difficult. To some extent, the biotechs, particularly the genomics companies, were benefiting from the rotation of investors out of the Internet. But something else was afoot: the Internet way of valuing companies had come to biotech. In particular, the biotechs are no longer being valued according to some basic earnings model, but--like the Internet plays--on their potential to dominate their niches, and then use their financial power, as reflected in their share prices, to consolidate to themselves other and harder assets.