Miracles are supposed to be easy. Throw a few goodies with long, indecipherable names into a test tube and millions of dollars are supposed to bubble up, as if by magic. That was biotechnology in 1982, or so it seemed.
By 1990, miracles were hard to come by. Biotechnology companies were having trouble making either products or money come out of test tubes. They had an even harder time extracting money from public capital markets. Some companies that looked like sure winners in 1982 or 1983 were struggling.
By 1995, it's all supposed to be easy again. Wall Street is touting the 1990s as "the decade of commercialization" for the biotech industry, when companies formed in the last decade will finally move products onto the market. All the troubles of the late 1980s and 1990 will, in theory, be forgotten.
Dr. Hans Mueller knows all about miracles -- and near-misses. As president and chief executive of Nova Pharmaceutical Corp., Baltimore's best-known company in the race to fulfill biotech's delayed promise, he has witnessed the industry's entire growth curve. Nova has been up. More recently, Nova has been down. And Dr. Mueller is trying to lift it up again.
Nova benefited from the heady euphoria of the early 1980s. Founded in 1982, the company once was ranked with biotech pioneers such as Genentech Inc. and Amgen Inc. that have since gone on to bigger things. Nova's stock once traded as high as $23. Wall Street was dazzled by the Nobel Prize-winning scientist who was a consultant and by the presence of former President Gerald R. Ford on the company's board.
"Nova certainly was a top 10 company at one point," says Jonathan Frank, a securities analyst for Swiss Bank Corp. Investment Banking in New York.
Things got tougher by last year. An important early product didn't work in clinical trials, SmithKline Beecham Corp. canceled a scheduled $24 million investment in joint ventures with Nova in January 1990, and last year's invasion of Kuwait by Iraq sent the stock market into the tank, forcing cancellation of a $25 million preferred stock offering designed to replace the SmithKline money.
Nova lost $14.2 million on revenues of $36 million in 1990. Its stock traded around $3 earlier this year before rebounding to close at $5.50 Friday. And the company isn't likely to make a profit for several years.
"They've had a fall from grace and they haven't returned," says Mr. Frank. "Analysts have focused on the top 10 for the last 18 months and Nova has been left out." Why? "Lack of good clinical trial results," he says.
Baltimore's civic fathers hope Dr. Mueller can return the company to its former stature. They want Nova to become a cornerstone of the Baltimore-Washington corridor's nascent biotech industry -- the big company that puts the area on the map and generates business for smaller players, the way drug giants such as Merck, Schering-Plough and Warner-Lambert have done near their New Jersey headquarters.
"What I've come to realize about Nova is that as the region tries to capitalize on its research base, you need companies of some size and stature," says Thomas J. Chmura, deputy director of the Greater Baltimore Committee. "If you simply look at the biotech-related companies that have products in the pipeline and have the staying power to go through the ups and downs, Nova is the best. . . . The key is them turning the products that are in the pipeline into sales."
Indeed, that is the rub. Companies such as Amgen and Genentech have done it already. Nova hasn't. Even Dr. Mueller acknowledges that Nova hasn't met Wall Street's rosy expectations. "We're locked into a second tier of biotechnology companies," he says.
Biotech companies generally need about 10 years to get rolling, to develop products and to close in on profitability. Nova is actually a rational drug development company rather than a true biotechnology outfit. Such companies use computer models and other high-tech methods to develop drugs from chemicals. Unlike classic biotech companies, their work doesn't necessarily involve the alteration of genetic material.
Because of Nova's approach, analysts expect the company to progress more slowly. The company is now approaching its 10th year. In the next few years, the world will find out what Nova really has.
"There were cycles. Every company has cycles. Nobody always wins," Dr. Mueller says. "But the ability to deal with defeat separates the men from the boys. We're here to stay."
When most people look out the window of Sandoz Inc.'s U.S. headquarters in East Hanover, N.J., they see a tacky suburban landscape: an ugly red-and-gray office building across Ridgedale Avenue, an intersection once named one of the 10 most polluted in Morris County because of the traffic, and the often-flooded Whippany River.
When Hans Mueller looked out that window in the mid-1980s, he saw an industry ready to start without him.