Our Top Ten Items from a Year Most Want to Forget

1) The Ugly Market. Without question, issue number one for 2002. Stock funds fled health care, the pervasive bleakness dulling, not highlighting, the few bright spots. Both Big Pharma and biotech badly underperformed the Dow, dropping 21% and 34%, respectively. Medical devices did relatively well—a mere 15% decline. But even there, consolidation skews the numbers—a few winners, like Stryker Corp. and Boston Scientific Corp. , dramatically helped the index. In no segment could a small public company without great news buy an investor. IPOs were virtually nonexistent. The depression in the public market translated directly to a depression on the private side: valuations of follow-on financings, when they could be found, plummeted. Layoffs—both in anticipation of a financing squeeze and because of them—were common as even well-funded businesses tightened their belts in anticipation of a long financial drought: discovery scientists were hardest hit.

2) The Management Credibility Gap. One key reason for the market problems: distrust of management. Corporate malfeasance turned personal in 2002. Tyco International Ltd. 's accounting problems fell off...