Bets on 'picks, shovels,' and mice pay

When a gold rush gets underway, do you want to be a miner staking everything on a huge claim? Or a pick-and-shovel manufacturer trying to wring a steady profit from the miners' hopes and dreams?

That's the perennial question in the biotech business, where a few successful bets -- like Sepracor Inc.'s investment in the sleeping pill Lunesta -- can pay off with a huge stream of cash that lasts for years. Meanwhile, equipment and service suppliers ride the industry's ebb and flow with muted risks, but lower potential jackpots.

Last year was favorable for picks and shovels. Charles River Laboratories Inc., which occupies a curious market position as the world's top supplier of specialized mice and rats for drug testing, had a 46 percent jump in revenue, largely because it spent $1.5 billion in 2004 to expand into the business of running human clinical trials. Earlier this month, however, the low-key Wilmington company -- still run by the son of its founder -- took a hit on earnings and said it would sell off much of the human-testing business.

The top-ranking biotech company on our list is Genzyme Corp., which rose to number three with a big earnings gain on the year (see story, Page D12).

Its Cambridge neighbor Biogen Idec posted a sharp increase in profit margin at the end of a roller-coaster year in which it had to withdraw a multiple sclerosis drug, Tysabri, after two patients died of a rare brain disease. This year, Biogen -- and patients -- are waiting for Tysabri to get the green light from federal regulators again, but most analysts consider its revenue prospects dimmed.

In Billerica, Millipore Corp. makes ultraprecise filters that help biotech companies purify their delicate soups of valuable protein. The company hit 56th place on The Globe 100 with growing revenues, but shrinking profit margins from 2004. Just last month, however, Millipore plowed some of its cash into a $1.4 billion deal for another type of biotech supplier, a Georgia company that makes the customized nutrients that biopharmaceutical companies need to feed the fermenting tanks that produce their high-value proteins.

As the established biotech players grow into mature, multiproduct companies, and major drug companies continue to make investments in biotech-style development and production, a few concerns have emerged for the industry. One is whether small research-driven companies that haven't tested their drugs in humans still have access to the capital they need to grow.

''Funding became more cautious after the bubble," said Thomas M. Finneran, the president of the Massachusetts Biotechnology Council, citing the collapse in biotech stocks after a 2000-01 run-up. ''People got scorched pretty badly. That leaves some promising science on the shelf not getting funded."

As the biotech industry matures, Finneran said, it also has a challenge: getting the public to understand, rather than fear, a complex field of science that depends on exotic-sounding technology such as genetic alteration.

''It's a bit intimidating or daunting to the average consumer," said Finneran.

But as bioengineered products grow as a percentage of all new drug products, Finneran said, ''These are absolutely the challenges of success, and they're nice to have."

Stephen Heuser can be reached at sheuser@globe.com.