Biotech on the bubble

Everyone surely remembers the great Internet bubble that consumed the United States, if not the world, in the late 90s. If you were an Internet start up, times were great. IPOs guaranteed millions if not billions of dollars for the founders and their shareholders. The only problem was the companies had nothing to offer but the promise the good times would always continue. Then pop goes the bubble.
Now we have the potential to walk into the new bubble: Biotech companies. This week pharmaceutical giant Merck & Co. shelled out $1.1 billion to buy biotechnology firm Sirna Therapeutics Inc. Think about this one for a moment, Merck's $13-per-share offer for the San Francisco-based company is over a 100% premium over Sirna's closing on Monday.
Is this a move toward a bubble or is a smart move in an area that could pay off in years to come for Merck?
Sirna is developing drugs using RNA interference technology. There are at least a half-dozen biotechnology companies developing drugs that silence genes by interfering with the messenger-carrying RNA, a technique discovered by this year's Nobel Prize for medicine winners. There are eight U.S. and European patents specifically related to the technology.
Will this technology take off or will it go the way of other promising technologies? Venture capitalists have already invested hundreds of millions in the technology.
This deal is Merck’s second move in the RNA arena. They also invested in Alnylam Pharmaceuticals, one of Sirna’s competitors.
All this sounds good, right? Well, here is the issue, the closest drug Sirna has near market is at least two years away, and, in reality, more like three.
This is a complete turnaround for Sirna. In 2003, the company was failing when company officials decided to change its name from Ribozyme Pharmaceuticals Inc. to Sirna.
This is in no way suggesting biotech is even remotely close to those Internet start ups that filled the landscape, but they are companies to watch.
Talk to me.