European Biotechnology--A Question of Control

Investors' sharply reduced appetite for risk, coupled with fears of a global recession, heightened by September's terrorist attacks, have hit all European biotech stocks hard since the beginning of the year. A few, such as the UK's Acambis PLC and Biotrace International PLC , are experiencing the dubious benefits of bioterrorism-based recovery, but overall the picture is gloomy. European biotech IPOs have been few and far between, with most analysts not expecting the funding window to open before the second quarter of next year. Venture capital isn't easy to find either: it is flowing into Europe at less than half last year's rate ($2.4 billion by September, compared with $4.4 billion for the whole of last year).

Yet much of the European biotech industry is in a strong position despite the downturn, according to a recent report from Goldman Sachs. Never mind the share prices—most of which...