The year of the Biotechs: when dozens of tech players fell off the CE 100 growth index, these scrappy survivors gladly took the top spots. (Management).

The storm may have passed, but the damage to shareholder value was done--and the companies who lost it paid the price on Chief Executive's 11th annual growth index, or the CE 100. Not all were wiped out, however. The market tidal wave that toppled scores of overvalued dot-coms, telecoms and B2B technology firms left in its wake a core group of surviving companies that managed to shore up investors, even as share prices fluctuated wildly.

Biotechnology and medical companies did that especially well--or at least with some consistency from January 1999 to December 2001--according to this year's list of top performers (see methodology, page 26). Seven of the top 10 came from the medical industry, while only two were technology firms--storage networking company Emulex (#8) and wireless telecom Qualcomm (#9). That breakdown was in a stark contrast to last year's top 10, nine of which were technology or telecom providers.

Biotechs also dominated the top 50. "Some of that is a cyclical thing," says Scott Huffman, director of research at Chicago-based Zacks Investment Research, which compiled this year's results. "Investors got killed in technology, telecom, communications, so [they were asking], where's a hot market we can put some money into?" Biotechs, which offer the promise of hyper-growth if a blockbuster drug gets through clinical trials and wins FDA approval, were an alternative--and will continue to be, as more drugs emerge from the clinic to the market, according to Todd Nelson, managing director and head of life sciences and biotechnology equity research at Dain Rauscher Wessels.

#1: OSI Pharmaceuticals

Industry: Biotechnology

CE 100 start price: $3.19

CE 100 end price: $45.74

Price growth: 1333.86%

If he wanted to, Colin Goddard could claim much of the credit for OSI Pharmaceuticals' top ranking on this year's CE 100. After all, he took the helm of the Melville, N.Y.-based biotechnology firm in October 1998, just two months before the clock started on CE's growth measurement time frame.

The chairman and CEO got the ball rolling when he took over by announcing plans to move more aggressively in oncology, to acquire assets that would add depth to the company's research and to become more self sufficient. He wasn't content with the paternalistic model common in the industry--that of partnering with pharmaceutical giants and getting modest royalties for successful drugs in exchange for research funding.

Goddard raised crucial capital by creating momentum through a series of small acquisitions. And OSI was ready when the pivotal event came in June 2000: Pfizer was forced to unload one of its cancer-treatment drugs to win FDC approval of its proposed acquisition of Warner-Lambert. Since OSI had co-discovered the drug, known as Tarceva, the quickest divestiture mechanism for Pfizer was to transfer the drug back to OSI. Tarceva, now in Phase III trials, is expected to block tumor growth hormones in non-small cell lung and pancreatic cancer and is widely considered to have blockbuster potential. OSI then set up a partnership with two strong commercial players, Genentech and Roche, who will market the drug in the U.S. and abroad, respectively. OSI will have a 50 percent profit share in the U.S. and a "respectable" low 20s royalty overseas, Goddard says. He raised another $430 million on the strength of that deal.

Still not satisfied with OSI's depth -- and aiming for a pipeline full of winning oncology drugs -- Goddard acquired British Biotech in September 2001 and the oncology unit of the biotechnology firm Gilead three months later. Some investors questioned how much OSI paid for the Gilead assets. "And I certainly accept we paid department store prices," Goddard says, "but when you think about what it meant for us strategically, it was a very timely and appropriate deal."

The Imclone debacle is likely to invite more shareholder scrutiny in the months ahead. But Goddard says while a public blowup always has a negative impact on the sector, he expects that investors will be able to differentiate between Imclone's "high-risk strategy," as he calls it, and OSI's more conservative, methodical approach. "It has, to some degree, vindicated our strategy, but because we had already been on that road, we haven't changed course at all."

As for the importance of OSI's stock price growth, Goddard allows that it's an important asset for expansion, and it provides some measure of how well he as CEO is communicating the company's message. "But the flip side of that," he says, "is that we have to recognize at this stage of the company's growth that the stock is by definition volatile, and simple rumor or innuendo can cause significant fluctuations in the stock price. So it would be a mistake to agonize over it. We have taken a view as a board and management team that the only thing we can control is building long-term sustainable value."

A successful past does not guarantee a rosy future, however. One company's mistake -- Imclone's botched application for FDA approval for the promising drug Erbitux--has temporarily slowed growth of most of the industry and may affect its performance for the remainder of 2002. Imclone's mistake also erased most of the shareholder value that landed it in the No. 5 spot on this year's list.

"That unfortunate scenario wreaked havoc on the surrogates for value that Wall Street has used to evaluate biotech," says G. Steven Burrill, CEO of Burrill & Co., a San Francisco-based life sciences merchant bank. "At least in the short term, the industry will continue to be measured harshly by Wall Street, having essentially generated, in the aggregate, a relatively poor investment return for what has been a hugely supportive investment community. By the time we cruise into Q4, we're likely to see investor appetite return--and with it, the reopening of the IPO window."

Only time will tell. But the Imclone implosion underscores how damaging one mistake can be--and how quickly the CEO is blamed for it. "A lot of [the Imclone mistake] is being laid on the CEO [Sam Waksal]," Huffman points out. "Decisions that CEOs make in these cases are just crucial to whether their companies are going to be successful."

That may prove true for the remaining telecom and information technology firms--representing about a third of the total CE 100--which will have to slim down and focus on core competencies to stay on a growth track. Another third of the total are medical companies and the rest represent a smattering of industries, including basic materials, retailing, transportation, consumer goods and financial services.

Most of the technology firms are best-of-breed companies. "They're in a very specific niche," says Huffman, pointing to Emulex and Netegrity (#11), which provides secure networking software. That strategy ensures business even as companies clamp down on their spending.

Huffman notes that many CEOs are still in survival mode, after the difficult past year. But CE 100 leaders with whom we spoke describe acqusitions strategies and careful team-building that they hope will lead to continued growth, though they tend to measure their companies' success by more than just stock price. "It's the focus on fundamentals," says Donald Drakeman, CEO of Medarex (#2), "that will be the most important thing for probably any company in any industry."

Not to mention clarity, adds Huffman. "Investors will be focusing not so much on the amount of earnings--although profitability will still be key -- but on the quality of earnings," he says. The spectacular failures of several Fortune 500 companies and the revelation of balance sheet shenanigans have turned investors into cynics, prompting them to look for simple strategies and more transparency. "Companies will make or stay on the list because they have good businesses and management, not because they have good accountants and investment bankers."

#2: Medarex

Industry: Biotechnology

CE 100 start price: $1.52

CE 100 end price: $17.96

Price growth: 1081.58%

When a company's stock price can drop from $206 to $17.96, but still be No. 2 on the CE 100, you know it's been a wild ride on the market. And it has been that for Princeton, N.J.-based Medarex, its share price reflecting a net gain of 1,081 percent over three years.

That success is due in part to good planning by CEO Donald Drakeman and his colleagues, who began thinking early about the implications of the historic 1996 mapping of the human genome. "I remember a colleague and I were having one of those feet-up-on-the-table kind of discussions," Drakeman recalls. "And there was this epiphany--we realized we were in position to actually build a company around that new genomic era."

Since then, Medarex has unveiled impressive technology for developing monoclonal antibodies--molecules that act as guided missiles that seek out and destroy disease-causing cells--for the treatment of cancer, rheumatoid arthritis and other auto-immune diseases. Drakeman has concentrated on fostering key partnerships for drug development with pharmaceutical companies and other biotech peers to make sure Medarex's work stays current and competitive. "Curing cancer is hard work," he says. "We like to think we're the best in the world at what we do, but we also realize that being the best may not be good enough if you're trying to fight an intractable disease." Fifty-fifty collaboration, however, even for a common good, "can be challenging because nobody gets to be the boss," Drakeman observes.

One result of Medarex's efforts is MDX010, a drug treatment for a range of cancers that has shown promising results in early clinical trials.

"But that's just the tip of the iceberg," Drakeman says. "It's important to emphasize that our company is not wrapped around any one product, no matter how exciting, but has been set up to take advantage of the wealth of new opportunities."

#6: IDEC Pharmaceuticals

Industry: Biotechnology

CE 100 start price: $7.83

CE 100 end price: $68.93

Price growth: 780.33%

When asked to name his biggest challenge running IDEC Pharmaceuticals, CEO Bill Rastetter has to think a moment. "Finding a parking place in the morning," he jokes. "We're just growing too fast." Not that he's complaining. But managing hypergrowth has been a formidable task for the leader of the San Diego-based firm. At the last quarterly meeting, Rastetter, who introduces by name all new employees since the previous quarter, announced 64 new people, an increase of 10 percent. "The challenge is managing that growth, getting people integrated and acclimated to what we do here," he says.

What they do at IDEC is develop drugs to treat cancer. One in particular, Rituxan, has enjoyed phenomenal success as the first FDA-approved drug to treat non-Hodgkin's lymphoma, and is being marketed by IDEC's partner, Genentech, in the United States. A second drug, "designed to take over where Rituxan leaves off" in providing alternatives to chemotherapy for lymphoma patients, explains Rastetter, has just won FDA approval.

To keep the pipeline full, IDEC applies already-proven methodlogy for product discovery and development. Rastetter's approach is to stay focused on IDEC's core competency, he says, rather than take risks on unknowns and "spread ourselves too thinly."

He chalks up some of the volatility of the biotech sector to the complexity of its products and the fact that few investors grasp the science behind it--or are willing to wait 15 years for the company to become self-sufficient.

IDEC's patient investors have been rewarded over the past three years with a 780 percent gain. But while Rastetter says year-to-year growth is meaningful, he believes "looking at stock price too often is a distraction." He insists that he checks IDEC's price only once a day, "just so I can answer the question when I get home at night."

#10: Chesapeake Energy

Industry: Oil and Gas

CE 100 Start price: $.94

CE 100 end price: $6.61

Price growth: 603.19%

Aubrey McClendon didn't need the dot-com crash to teach him that hypergrowth can lead to burn-up in the atmosphere. The veteran of oil and gas had watched Chesapeake Energy's stock, once the darling of Wall Street, crumble to 75 cents by the end of 1998 from $34 in 1997. The company had been growing by 50 to 75 percent per year in an industry that typically crawls at a pace of no more than 1 to 3 percent. "We were priced for perfection," he says. That left no margin for error. With more debt than most companies in its sector, Chesapeake was poised for trouble. "When gas prices collapsed in 1998, our stock price collapsed too," McClendon recalls.

But he was determined to give Chesapeake new life and rebuild its reputation. He shifted strategy to focus more narrowly on building natural gas reserves in the United States, with operations in Kansas, Oklahoma and the Texas Panhandle. Over the past three years, Chesapeake has made more than $1.7 billion in acquisitions.

McClendon also slowed Chesapeake's growth to a more manageable rate of 15 to 20 percent annually. "We've added a billion dollars of shareholder equity in the last three years," he reports, "and more than $700 million of that has come from earnings."

Its stock price continues to climb, though nowhere near its high. "The whole natural gas industry is not valued by investors as much as Cisco," McClendon says. "I can assure you the country would get along fine without Cisco. Without natural gas, there would be no plastics, no heat for homes, and 20 percent of our electricity would go away.

That underinvestment tends to lead to spiking prices, as the U.S. saw last winter. "That was just a preview of what were likely to see over the next two or three years," he warns. "And it will be hugely beneficial to our company."

CE 100 (1-50)

Rank in Stock             Company                    Ticker   Price %
Price % Growth                                                 Growth
   1999-'01     1998-'00

       1          N.R.    OSI Pharmaceuticals         OSIP   1333.86%
       2          N.R.    Medarex                     MEDX   1081.58%
       3          N.R.    Laboratory Corp of           LH    1075.15%
                          American Holdings
       4          N.R.    Myriad Genetics             MYGN    952.80%
       5          N.R.    Imclone Systems             IMCL    925.61%
       6           8      IDEC Pharmaceuticals        IDPH    780.33%
       7          N.R.    Cephalon                    CEPH    739.83%
       8           1      Emulex                      EMLX    690.20%
       9           6      Qualcomm                    QCOM    679.32%
      10          N.R.    Chesapeake Energy           CHK     603.19%
      11          N.R.    Netegrity                   NETE    572.22%
      12          N.R.    Celgene                     CELG    522.22%
      13          N.R.    Cytyc                       CYTC    508.39%
      14           40     Biovail                     BVF     495.24%
      15          N.R.    Shaw Group                  SGR     487.50%
      16          N.R.    Protein Design Labs         PDLI    469.72%
      17          N.R.    Andrx Group                 ADRX    449.65%
      18          N.R.    Calpine                     CPN     431.33%
      19          N.R.    XTO Energy                  XTO     425.53%
      20          N.R.    Check Point                 CHKP    422.12%
                          Software Technologies
      21           23     Dynegy                      DYN     366.18%
      22          N.R.    Mitchell Energy &           MND     365.91%
                          Development
      23           10     Echostar Communications     DISH    354.05%
      24          N.R.    Investors Financial         IFIN    344.06%
                          Services
      25          N.R.    Integrated Device           IDTI    333.77%
                          Technology
      26          N.R.    Enzon                       ENZN    322.84%
      27          N.R.    BJ Services                 BJS     315.49%
      28          N.R.    Lam Research                LRCX    290.91%
      29           7      Triquint Semiconductor      TQNT    281.93%
      30           22     Human Genome Sciences       HGSI    279.30%
      31          N.R.    Millennium                  MLNM    278.83%
                          Pharmaceuticals
      32          N.R.    International Rectifier     IRF     257.74%
      33          N.R.    Newport                     NEWP    242.45%
      34          N.R.    Eaton Vance                  EV     240.52%
      35          N.R.    Manugistics Group           MANU    237.28%
      36          N.R.    Veritas Software            VRTS    236.56%
      37          N.R.    Siebel Systems              SEBL    229.95%
      38           85     UnitedHealth Group          UNH     228.70%
      39          N.R.    The Timberland Co.          TBL     225.55%
      40          N.R.    Gilead Sciences             GILD    220.12%
      41          N.R.    Silicon Valley              SIVB    213.73%
                          Bancshares
      42          N.R.    Aeroflex                    ARXX    212.89%
      43          N.R.    Arthur J Gallagher & Co.    AJG     212.69%
      44           9      Business Objects            BOBJ    212.10%
      45          N.R.    Caremark Rx                 CMX     210.67%
      46          N.R.    Affymetrix                  AFFX    209.68%
      47           28     Forest Laboratories         FRX     208.20%
      48          N.R.    Polycom                     PLCM    206.11%
      49          N.R.    Symantec                    SYMC    204.97%
      50          N.R.    Ocean Energy                OEI     204.28%
      51           16     IVAX                        IVX     203.77%
      52           77     Lehman Brothers             LEH     203.22%
      53           58     Teva Pharmaceuticals        TEVA    203.00%
      54          N.R.    First Health Group          FHCC    198.79%
      55           45     Analog Devices              ADI     182.92%
      56          N.R.    Int'l Game Technology       IGT     180.92%
      57          N.R.    Medimmune                   MEDI    179.72%
      58          N.R.    Apria Healthcare            AHG     179.53%
      59          N.R.    St. Jude Medical            STJ     178.52%
      60          N.R.    AVX                         AVX     178.51%
      61          N.R.    Mentor Graphics             MENT    177.29%
      62          N.R.    Luxottica Group             LUX     174.67%
      63           18     SEI Investments             SEIC    172.40%
      64          N.R.    Genentech                   DNA     172.34%
      65           3      QLogic                      QLGC    172.07%
      66           68     Expeditors Int'l            EXPD    171.19%
                          of Washington
      67          N.R.    Adobe Systems               ADBE    165.61%
      68           14     Immunex                     IMNX    164.41%
      69          N.R.    Noble Drilling               NE     163.06%
      70          N.R.    Nabors Industries           NBR     154.30%
      71          N.R.    Vishay Intertec             VSH     152.26%
      72          N.R.    PerkinElmer                 PKI     151.76%
      73          N.R.    White Mountain Insurance    WTM     148.46%
      74          N.R.    Barr Labs                   BRL     148.00%
      75           57     Bisys Group                 BSYS    147.93%
      76          N.R.    Qiagen                     QGENF    146.48%
      77           20     Cree                        CREE    146.12%
      78          N.R.    First Data                  FDC     146.08%
      79           36     STMicroelectronics          STM     143.43%
      80           55     Best Buy                    BBY     142.68%
      81          N.R.    Tiffany & Co.               TIF     142.64%
      82          N.R.    Foot Locker                  Z      140.77%
      83           53     Genzyme                     GENZ    140.59%
      84           70     Maxim Integrated Products   MXIM    140.43%
      85           30     Xilinx                      XLNX    139.86%
      86           92     Cypress Semiconductor        CY     139.83%
      87           50     Novellus                    NVLS    139.09%
      88          N.R.    Alkermes                    ALKS    137.69%
      89          N.R.    Harrah's Entertainment      HET     135.88%
      90          N.R.    Affiliated Computer         ACS     135.84%
                          Services
      91          N.R.    Microchip Technology        MCHP    135.64%
      92          N.R.    Equitable Resources         EQT     134.00%
      93          N.R.    Ensco International         ESV     132.46%
      94          41.     Concord EFS                 CEFT    131.99%
      95          N.R.    Allergan                    AGN     131.78%
      96          N.R.    The Talbots                 TLB     131.04%
      97          N.R.    Kinder Morgan               KMI     129.65%
      98          N.R.    Kohl's                      KSS     129.30%
      99           62     Harley-Davidson             HDI     129.25%
     100          N.R.    KLA-Tencor                  KLAC    128.49%

Rank in Stock             Company                    CEO
Price % Growth
   1999-'01     1998-'00

       1          N.R.    OSI Pharmaceuticals        COLIN GODDARD
       2          N.R.    Medarex                    DONALD DRAKEMAN
       3          N.R.    Laboratory Corp of         THOMAS MACMAHON
                          American Holdings
       4          N.R.    Myriad Genetics            PETER MELDRUM
       5          N.R.    Imclone Systems            SAMUEL WAKSAL
       6           8      IDEC Pharmaceuticals       WILLIAM RASTETTER
       7          N.R.    Cephalon                   FRANK BALDINO, JR.
       8           1      Emulex                     PAUL FOLINO
       9           6      Qualcomm                   IRWIN JACOBS
      10          N.R.    Chesapeake Energy          AUBREY MCCLENDON
      11          N.R.    Netegrity                  BARRY BYCOFF
      12          N.R.    Celgene                    JOHN JACKSON
      13          N.R.    Cytyc                      PATRICK SULLIVAN
      14           40     Biovail                    BRUCE BRYDON
      15          N.R.    Shaw Group                 JAMES BERNHARD JR.
      16          N.R.    Protein Design Labs        LAURENCE KORN
      17          N.R.    Andrx Group                ELLIOT HAHN
      18          N.R.    Calpine                    PETER CARTWRIGHT
      19          N.R.    XTO Energy                 BOB SIMPSON
      20          N.R.    Check Point                GIL SHWED
                          Software Technologies
      21           23     Dynegy                     CHARLES WATSON
      22          N.R.    Mitchell Energy &          GEORGE MITCHELL
                          Development
      23           10     Echostar Communications    CHARLES ERGEN
      24          N.R.    Investors Financial        KEVIN SHEEHAN
                          Services
      25          N.R.    Integrated Device          JERRY TAYLOR
                          Technology
      26          N.R.    Enzon                      ARTHUR HIGGINS
      27          N.R.    BJ Services                J.W. STEWART
      28          N.R.    Lam Research               JAMES BAGLEY
      29           7      Triquint Semiconductor     STEVEN SHARP
      30           22     Human Genome Sciences      WILLIAM HASELTINE
      31          N.R.    Millennium                 MARK LEVIN
                          Pharmaceuticals
      32          N.R.    International Rectifier    ALEXANDER LIDOW
      33          N.R.    Newport                    ROBERT DEUSTER
      34          N.R.    Eaton Vance                JAMES HAWKES
      35          N.R.    Manugistics Group          GREGORY OWENS
      36          N.R.    Veritas Software           GARY BLOOM
      37          N.R.    Siebel Systems             THOMAS SIEBEL
      38           85     UnitedHealth Group         WILLIAM MCGUIRE
      39          N.R.    The Timberland Co.         JEFFREY SWARTZ
      40          N.R.    Gilead Sciences            JOHN MARTIN
      41          N.R.    Silicon Valley             KENNETH WILCOX
                          Bancshares
      42          N.R.    Aeroflex                   HARVEY BLAU
      43          N.R.    Arthur J Gallagher & Co.   J.P. GALLAGHER, JR.
      44           9      Business Objects           BERNARD LIATAUD
      45          N.R.    Caremark Rx                EDWIN MACCRAWFORD
      46          N.R.    Affymetrix                 STEPHEN FODOR
      47           28     Forest Laboratories        HOWARD SOLOMON
      48          N.R.    Polycom                    ROBERT HAGERTY
      49          N.R.    Symantec                   JOHN THOMSON
      50          N.R.    Ocean Energy               JAMES HACKETT
      51           16     IVAX                       PHILLIP FROST
      52           77     Lehman Brothers            RICHARD FULD JR.
      53           58     Teva Pharmaceuticals       ELIYAHU HURVITZ
      54          N.R.    First Health Group         EDWARD WRISTEN
      55           45     Analog Devices             JERALD FISHMAN
      56          N.R.    Int'l Game Technology      G. THOMAS BAKER
      57          N.R.    Medimmune                  DAVID MOTT
      58          N.R.    Apria Healthcare           PHILIP CARTER
      59          N.R.    St. Jude Medical           TERRY SHEPHERD
      60          N.R.    AVX                        JOHN GILBERTSON
      61          N.R.    Mentor Graphics            WALDEN RHINES
      62          N.R.    Luxottica Group            LUIGI FRANCAVILLA
      63           18     SEI Investments            ALFRED WEST JR.
      64          N.R.    Genentech                  ARTHUR LEVINSON
      65           3      QLogic                     H. DESAI
      66           68     Expeditors Int'l           PETER ROSE
                          of Washington
      67          N.R.    Adobe Systems              BRUCE CHIZEN
      68           14     Immunex                    EDWARD FRITZKY
      69          N.R.    Noble Drilling             JAMES DAY
      70          N.R.    Nabors Industries          EUGENE ISENBERG
      71          N.R.    Vishay Intertec            FELIX ZANDMAN
      72          N.R.    PerkinElmer                GREGORY SUMME
      73          N.R.    White Mountain Insurance   JOHN BYRNE
      74          N.R.    Barr Labs                  BRUCE DOWNEY
      75           57     Bisys Group                LYNN MANGUM
      76          N.R.    Qiagen                     METIN COLPAN
      77           20     Cree                       F. NEAL HUNTER
      78          N.R.    First Data                 CHARES FOTE
      79           36     STMicroelectronics         PASQUALE PISTORIO
      80           55     Best Buy                   RICHARD SCHULZE
      81          N.R.    Tiffany & Co.              MICHAEL KOWALSKI
      82          N.R.    Foot Locker                MATTHEW SERRA
      83           53     Genzyme                    HENRI TERMEER
      84           70     Maxim Integrated Products  JOHN GIFFORD
      85           30     Xilinx                     WILLEM ROELANDTS
      86           92     Cypress Semiconductor      T.J. RODGERS
      87           50     Novellus                   RICHARD HILL
      88          N.R.    Alkermes                   RICHARD POPS
      89          N.R.    Harrah's Entertainment     PHILIP SATRE
      90          N.R.    Affiliated Computer        JEFFREY RICH
                          Services
      91          N.R.    Microchip Technology       STEVE SANGHI
      92          N.R.    Equitable Resources        MURRY GERBER
      93          N.R.    Ensco International        CARL THORNE
      94          41.     Concord EFS                DAN PALMER
      95          N.R.    Allergan                   DAVID PYOTT
      96          N.R.    The Talbots                ARNOLD ZETCHER
      97          N.R.    Kinder Morgan              RICHARD KINDER
      98          N.R.    Kohl's                     R. L. MONTGOMERY
      99           62     Harley-Davidson            JEFFREY BLEUSTEIN
     100          N.R.    KLA-Tencor                 KENNETHSCHROEDER

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RELATED ARTICLE: CE 100 Methodology

TO PRODUCE this year's CE 100, the Quantitative Consulting Group at Chicago-based Zacks Investment Research mined its database of more than 7,800 public companies trading in the U.S. or Canada. They selected the 100 fastest-growing common stocks or ADRs (based on total percentage growth in stock price from 1/1/1999 to 12/31/2001), where:

* The same CEO was heading the company from 1/1/1999 through 12/31/2001;

* The company's common stock (or ADR) is currently traded publicly in the U.S. or Canada, and has been publicly traded continuously from 1/1/1997 through 12/31/2001 in the US. or Canada; and

* The company's total common stock market capitalization at the end of December 2000 was at least $1.54 billion.