PALO ALTO, Calif. (CNN/Money) - About a year ago, well after the bubble for most kinds of stocks had popped, I alerted readers here to another kind of trap, the still bubbly stocks of biotechnology companies trying to capitalize on human genomics research.

In particular, I pooh-poohed the shares of a company down the street from me, Incyte Genomics (ICNY: Research, Estimates), whose shares had risen dramatically because the company had hired some experienced hands to run its drug development programs. (See the story)

I disliked the Incyte story merely because it smelled so much like the Internet debacle I'd just witnessed. The company used to be called Incyte Pharmaceuticals, and it had a nice little software business selling its database of human genome codes to drug researchers. In an effort to cash in on a craze, Incyte slapped the word "genomics" on its rear end, announced it was going to develop drugs of its own and watched its stock soar.

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But like some of the sillier Internet stories (my favorite was the fish meal company Zapata changing its name to Zap.com, boosting its stock several fold), Incyte wasn't magically transformed. As I observed last year, it was at the very beginning of what's known as the drug-discovery process, something more experienced firms like Millennium Pharmaceuticals (MLMN: Research, Estimates) and Human Genome Sciences (HGSI: down $0.58 to $8.50, Research, Estimates), already had been doing for years.

Fast forward to Tuesday, when Incyte said it would slash 260 of its 700 employees, consolidate labs and write off a bunch of software it doesn't need. The stock, at $19.11 last November, closed Wednesday at $5.24. Incyte says it's begun work on its first drug. But it also notes that subscriptions are slipping for its genomics data, the one thing that brings in real revenue.

Incidentally, the so-called more advanced companies I referred to last year have done even worse than Incyte. Millennium's shares are down 76 percent. And shares of Human Genome, which has more cash on its balance sheet than its market valuation, are off 80 percent.

There will come a time in the not so distant future when another bubble arises. Maybe it will be a sub-segment of technology, or real estate or even media companies. There will be a tremendous temptation to jump into the pool. Resist it.

Adam Lashinsky is a senior writer for Fortune magazine. Send e-mail to Adam at lashinskysbottomline@yahoo.com.

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