PRINT THIS PAGE Biotech takes a hit at the start of the year
31/08/2005. Source:Burrill & Company.
The US IPO window remained slightly open in February 2005 with three biotech firms joining the publicly traded market, says Burrill & Company. Favrille, Inc, a biopharmaceutical company focused on cancer and diseases of the immune system, made its debut. Icagen and Threshold Pharmaceuticals also went public, but Threshold Pharmaceuticals only raised $37m instead of the $86m hoped for. "Although the biotech industry managed to hold its own during much of the month with the Burrill Select Index up slightly as we cruised into the final weekend of February, the startling news that Biogen Idec (BIIB) and partner, Elan PLC (ELN) were pulling from the market their new drug for multiple sclerosis, Tysabri, not only gutted the value of both companies immediately, but also dampened the performance of other publicly traded biopharmaceutical firms," noted G. Steven Burrill, CEO of Burrill & Company, a San Francisco based life sciences merchant bank. The Burrill Biotech Select Index ended February down 2%, compared to the NASDAQ, down less than 1% and the DJIA, up nearly 3% for the month.
"The news about Tysabri couldn't have come at a worse time, following as it did in the footsteps of tremendous controversy surrounding the use of COX-2 inhibitors," said Burrill. "Less than two weeks after the FDA expert advisory panel voted in favor of allowing the arthritis painkiller Vioxx and other COX- 2 inhibitors to remain available on the market under strict conditions, Biogen Idec and Elan make the announcement that physicians should suspend dosing of Tysabri until further notice ... investors were taken completely off guard," he explained.
"This particular drug, the first new type of drug in eight years to treat MS, had been heralded as a blockbuster with analysts predicting sales as high as $3 billion a year. Both companies were counting on the drug's success and share values were built on that expectation," he added. "Not surprisingly, Biogen Idec's stock plummeted 41% on the news and Elan ended the month down 65%," he said. "But the bad news for Tysabri sent shares of the makers of competitive drugs higher-Serono (SRA), maker of MS drug Rebif, saw its shares rise nearly 20% on the news and shares of Teva Pharmaceuticals (TEVA) which manufactures another popular MS drug, Copaxone, rose 9%," noted Burrill.
Although there were no FDA approvals of note in February, biotech firm, Gilead Sciences (GILD) did receive approval from European Commission to market Truvade, its HIV drug combination therapy (Emtriva and Viread are in one pill) in all 25 member states of the European Union. The EC authorization is the fourth that the company has received in the last three years to sell its antiretroviral products in the EU. The company reported earlier in the year that its HIV product sales for 2004 rose to $908 million from $576 million in 2003.
"There were also two notable clinical successes in February," said Burrill. On February 14th, Charles Arntzen who co-directs the Center for Infectious Diseases and Vaccinology at the Biodesign Institute at Arizona State University, announced that a hepatitis B vaccine grown in genetically engineered potatoes appeared to protect most of the people who ate them. "Arntzen and his colleagues have been working on the creation of safe and efficacious vaccines that can be delivered cheaply and easily to those who need it most-men, women, and children in developing nations where most cases of the disease are reported," noted Burrill.
About 60% of the 42 volunteers who participated in the trial and ate the biggest dose of potatoes showed an immune response that should protect against infection with the hepatitis B virus. "This could be an enormous advance for humanity as the current (and only available) hepatitis B shot must be refrigerated and it is too expensive for use in poor communities," noted Burrill.
The IPO window remained slightly open in February with three biotech firms joining the publicly traded market. On February 2, Favrille, Inc (FVRL), a biopharmaceutical company focused on cancer and diseases of the immune system, made its debut. While the company had hoped initially to raise $86 million at a range of $12-$14 a share, market conditions forced a different bargain. Despite having a lead drug for the treatment of indolcent B-cell, non- Hodgkin's lymphoma in Phase III clinical trials, the company was able to raise only $42 million issuing 6 million shares at $7 a piece. The company's value dipped 3% on opening day and ended the month down less than 1%.
Another biotech firm, Icagen (ICGN), went public on February 3, raising $40 million at $8 a share. Like Favrille, Icagen had hoped to raise $86 million at a range of $10-$12 a share. Abbott Laboratories (ABT) has a 7.7% stake in the company which has four drugs in clinical trials for the treatment of sickle cell anemia, epilepsy and dementia. Icagen also has co-marketing and collaborative deals going with Johnson and Johnson's (JNJ) McNeil-PPC division. On February 22, the company announced the initiation of enrollment in its pivotal Phase II trial of ICA-17043 for sickle cell disease. But investors were not impressed and shares of ICGN ended the month down 10%.
Finally, Threshold Pharmaceuticals (THLD), priced its IPO at $7 per share on February 4, down significantly form the $14-$16 per share price range originally sought. The company raised $37 million, instead of the $86 million hoped for. Although shares rose 2% in value on day one, they ended the month flat. Threshold makes small moledule drugs that target abnormal glucose metabolism-a fundamental property of most solid tumors and other diseases. The company's initial focus is on the treatment of cancer and benign prostatic hyperplasia.
There was big news out of Washington this month. First was President George W. Bush's nomination on February 14 of Dr. Lester M. Crawford, the FDA's acting commissioner, to head up the agency permanently. Crawford has been serving as acting commissioner or deputy commissioner for nearly three years during the Bush administration. Although trained in veterinary medicine and pharmacology, Crawford has been deeply involved in food safety issues for the FDA and has also been an advisor to the United Nation's World Health Organization for almost 20 years. Many think that the choice is a good one, but the nomination still must receive confirmation in the Senate.
Then, on February 21 came the announcement from the Centers for Disease Control and Prevention (CDC) that the avian flu poses the single biggest threat to the world right now and we are woefully under-prepared for a pandemic. The H5N1 avian flu, can jump from birds to people and kills an estimated 72% of all diagnosed victims, according to CDC Director, Dr. Julie Gerberding. Although the U.S. government has contracted with Chiron and Sanofi-Aventis to make a vaccine which will begin testing in people later this year, capacity may be a serious issue if a pandemic is looming.
"Only two million doses of an experimental vaccine against the avian strain are set to be prepared and the earliest possible date that a vaccine against the flu could be commercialised is summer of 2006," noted Burrill. "But history has demonstrated that a new pandemic virus could spread worldwide in less than six months and a pandemic would affect about 30% of the population, with a mortality rate of 1%," he said. "As Dr. Gerberding has said, 'there is no wiggle room' and we can only hope that innovation will save the day," added Burrill.
The Burrill IPO Index lost 5% of its value in February and is down 10% year to date. Shares of Tercica (TRCA), which had dropped precipitously in January after the company proposed a follow-on offering of 6 million shares of common stock, rebounded as shares of the offering were quickly snapped up in early February and underwriters exercised their option in full to purchase additional shares. Tercica's shares finished February up 29%.
Shares of Myogen (MYOG) first experienced a sharp rise in anticipation of a positive announcement about the company's clinical trials for ambrisentan, its treatment for pulmonary arterial hypertension. That was then followed by a sharp decline as Myogen announced that completion of patient enrollments for the trial would be delayed by six months. Except for this unusual spike, shares gained throughout the month to end up 24%. Senomyx's (SNMX) shares also rose 23% with the announcement of fourth quarter and year end results which showed a reduced net loss.
Shares of Xcyte Therapies (XCYT) fell 20% after the company withdrew its submission to the FDA of the clinical protocol for a planned Phase II/III trial of Xcellerated T Cells in chronic lymphocytic leukemia. Xcyte plans to resubmit the protocol after further discussions about the trial's design and expects the trial to begin after the second quarter of 2005. Shares of Renovis (RNVS) declined steadily throughout the month to end down 21%. The company filed a shelf registration to sell up to $100 million in debt, common stock, preferred stock and warrants.
The Burrill Select Index dropped 2% in February and is down 7% since the beginning of the year. Shares of Vertex Pharmaceuticals (VRTX) had a bumpy month but ended up 13%. Excluding charges and other items, the company reported a 2004 net loss which was 6 cents less than expected. Vertex has several promising drug candidates in its pipeline including a novel compound to treat hepatitis C which should enter Phase II trials later this year. Mid- month, Vertex and Avalon Pharmaceuticals announced a licensing agreement for the development and commercialization of Vertex's VX-944 small molecule IMPDH inhibitor in oncology indications. Under the terms of the agreement, Vertex will receive up to $73 million in upfront license fees and milestone payments and upon commercialization, royalties on product sales. Vertex retains certain rights to co-promote VX-944 in the U.S. and European markets.
Protein Design Labs' (PDLI) shares tumbled 12% as the company sold $250 million worth of seven-year convertible senior notes to fund working capital and other general corporate purposes. Protein Design Labs had earlier agreed to acquire ESP Pharma in a cash and stock deal worth $475 million; a deal that had been sweetened after ESP acquired rights to J&J's (JNJ) Centocor division's heart attack treatment Retavase. Shares tumbled another 14% after Biogen Idec and Elan abruptly withdrew Tysabri, their newly approved MS drug, from the market. PDLI was slated to receive royalties on Tysabri because the drug was developed using its patented technology. PDLI's shared ended February down 26%.
Shares of Maxygen (MAXY) fell another 13% in February. The company reported a net loss from continuing operations of $1.40 per share for 2004 compared to a loss of $0.89 per share in 2003. Shares of Geron (GERN) also fared poorly in the month and ended February down 14%. Although the company reduced its net loss for the fourth quarter, Geron announced that its net loss for the 2004 year was $1.79 per share compared to a net loss of $0.97 per share in 2003.
The Burrill Large Cap Index sank 6% in February and is down 8% for the year. As previously noted, Biogen Idec's (BIIB) shares tumbled 41% after the company announced the voluntary withdrawal of recently approved MS drug Tysabri after one patient died and another developed a serious disease of the central nervous system. Both patients had taken Tysabri for more than two years in combination with Biogen's older MS drug, Avonex. Biogen Idec affirmed their belief in the promising therapeutic benefit of Tysabri but are putting patient safety above all other considerations while they work to evaluate the situation. Elan Corporation's (ELN) shares also took a major hit, plunging more than 65% on the news. Elan is the co-developer of Tysabri.
Although the SEC opened a formal investigation into possible violations of securities laws by Chiron (CHIR), shares of the company were buoyed by testimony of a senior FDA official before a congressional committee attesting to Chiron's progress in fixing the problems at its British vaccine plant that cost the U.S. half its vaccine supplies this past winter. Shares rose 8% in February.
Shares of Affymetrix (AFFX) continued to rise in February gaining another 4%. The company launched several strategic alliances: with Institut Curie in Paris to use GeneChip(R) microarray technology to find genetic signatures for cancer that could be used to develop diagnostic tests; another with Stratagene where Stratagene will provide Affymetrix customers with new software solutions for GeneChip(R) data analysis including the development of a new software package which will be offered as a standard statistical analysis solution of Affymetrix gene expression microarrays; one with Karolinska Institutet in Stockholm, Sweden with the goal of improving healthcare by accelerating the translation of basic genetic research into tools for better diagnosis, prognosis, and treatment; and one with the Harvard Medical School - Partners HealthCare Center for Genetics and Genomics (HPCGG) which will provide HPCGG with early access to next-generation Affymetrix GeneChip(R) technology to launch a major genotyping study in atherosclerosis.
Shares of Gilead Sciences (GILD) had a rocky ride but ended February up 4%. Shares sank after an AIDS-prevention-in-a-pill study in Cameroon was halted amid protests. Gilead was supplying Viread free for the study which was being conducted under a grant from the Gates Foundation. This setback was overcome two weeks later when Gilead reported that it received marketing authorization for its HIV combination drug Truvada from European regulators.
ICOS Corporation's (ICOS) shares continued to lose ground, ending the month down 12% even as the company reported a narrower fourth quarter loss and expectations of a narrower loss in full-year 2005. This forecast is mainly due to the expectation that the company's joint venture with Eli Lilly -- Lilly Icos which makes and markets Cialis -- will become profitable in 2005.
The Burrill Mid-Cap Index dropped 8% in February and is 15% below its value at the beginning of the year. Shares of Neurochem (NRMX) fell 18% after the company announced wider net losses for the fourth quarter and fiscal year. These losses were mainly attributable to increased drug development costs for Alzhemed(TM) for the treatment for Alzheimer's disease and Fibrillex(TM) for the treatment of Amyloid A (AA) Amyloidosis. Neurochem also announced that it filed a prospectus with regulators for an offering of four million common shares.
Shares of Enzon Pharmaceutical (ENZN) slid 17% in February after the company announced decreased net income for its second quarter of FY 2005 compared to the previous year's quarter due to decreased sales and royalty income. The company also stopped further development of its drug candidate, Pegamotecan, which was being tested in a Phase IIb trial on patients with gastric and gastroesophageal cancers.
Although Diversa Corporation (DVSA) reported an 18% increase in revenue and a reduced net loss for the 2004 year, shares still sank 13% after a Wall Street analyst downgraded the company citing a challenging environment and the stock's relatively high price compared to its rivals. Illumina, Inc.'s (ILMN) shares also sank 15% after being downgraded by a Wall Street analyst even though the company reported a significant increase in revenue and a reduced net loss for the 2004 fiscal year. Shares of Neurogen (NRGN) dropped 15% in February in very light trading.
The Burrill Small-Cap Index lost 8% of its value in February and is down 17% year to date. Very few companies managed to eke out a gain for the month. One exception was Cerus Corporation (CERS) which saw its share value climb 29% in February for several reasons. First, the company agreed to extend its pact with Baxter International to market Cerus's Intercept Blood System in Europe through 2006 and resolved a dispute over a loan related to the deal. Cerus also reported a narrowed net loss for 2004. Finally, two of Cerus's top executives purchased 50,000 company shares mid-month. Shares of Immtech International (IMM) rose 26% driven by the initiation of coverage by a Wall street analyst with a positive recommendation even though the company reported reduced revenues and a wider net loss for their fiscal third quarter ending December31, 2004. Immtech is developing oral drugs to treat infectious diseases affecting the global population.
Shares of Aphton Corporation (APHT) plunged 46% after the company reported that its cancer treatment, Insegia, missed its primary endpoint of improving overall survival rates in a Phase III clinical trial of pancreatic cancer patients. Neose Technologies' (NTEC) shares dropped 35% in February. Shares, partly on the announcement of a follow-on offering, whereby the company priced the public offering of 7 million shares at a 16% discount to its previous day's closing price. The company completed the offering of a total of more than 8 million shares including the underwriters' allotment, for gross proceeds of $32.2 million. Entremed's (ENMD) shares, which had been on the upswing for the last couple of months, fell 34% in February.
The Burrill Genomics Index was down 3% in February and is down 6% since the beginning of the year. Lynx Therapeutics (LYNX) saw its shares rise 19% in the month. The company announced a follow-up contract with researchers at the University of Southern California to study oyster larval development using Lynx's gene expression technology. Lynx also announced funding by the USDA which was awarded to University of Delaware researchers to use Lynx's technology to profile RNA in rice. Shares of Nanogen (NGEN) fell 23% as the company reported preliminary results for the fourth quarter and year-end 2004 which showed a wider net loss for the quarter compared to last year; but a narrowed net loss for 2004 of $1.21 per share compared to $1.38 per share loss in 2003. Shares of Celera Genomics (CRA) also fell, dropping 16% as the company reported a 43% wider net loss for its second quarter on reduced revenue.
The Burrill Diagnostics Index fell 2% in February and is down 3% for the year. EXACT Sciences' (EXAS) shares rose on positive fourth quarter and year- end 2004 results to gain 40% in February. The company also benefited from a study published in the American Journal of Preventive Medicine which found that patients perceived stool-based DNA testing to have many advantages over both fecal occult blood testing and colonoscopy, and preferred stool-based DNA testing for their routine colorectal cancer screening. EXACT Sciences is the maker and marketer of PreGenPlus(TM), a stool-based DNA test.
Shares of Orchid Biosciences (ORCH) gained 20% in February on heavy volume trading at the beginning of the month. Shares of Bio-Rad Laboratories (BIO) plunged 17% after the company reported that earnings fell from last year due to acquisition costs and expenses to become compliant with new accounting rules. Shares of Myriad Genetics (MYGN) tumbled from the highs set in January after the company reported results for the second quarter of fiscal 2005. Although revenues were up 68% over the same quarter last year, net loss remained relatively unchanged as Myriad increased its investment in active human clinical studies. Shares ended February down 12%.
The Burrill Agbio Index gained 5% in February and is up 4% year to date. Shares of Terra Nitrogen Company (TNH) quickly recovered from a sell-off after the company reported decreased revenues and net income for the fourth quarter but an increase in net income for 2004 compared to a net loss for 2003. TNH shares ended the month up 20%.
Shares of DuPont (DD) climbed steadily in February ending the month up 12%. The company's biologically derived polymer Sorona(R) received global recognition as an environmentally sustainable innovation. DuPont's scientists recently developed a way to make Bio PDO(TM), the key ingredient in Sorona(R), from corn using a new biological process that requires over 40% less total energy than traditional petrochemical feedstock.
Shares of Eden Biosciences (EDEN) plummeted 40% in February after the company announced decreased product sales for the fourth quarter 2004 and year-end 2004 although the company managed to reduce its net loss for the year as compared to 2003. Large Scale Biology Corporation (LSBC) also reported financials for the fourth quarter and year-end. Although LSBC reported reduced net losses, its shares fell on the news ending the month down 29%.
The Burrill Industrial Biotech Index rose 5% in February and is up 4% for the year. Shares of Imperial Chemical Industries PLC (ICI) gained 12% after reporting fourth quarter results of a 10% pre-tax profit increase over the same period in 2003 and the company's shares ended the month up 18%. Chevron Texaco Corporation's (CVX) stock rose 14% during February after the company reported that its fourth quarter net income nearly doubled, beating analysts' expectations. Income was fueled by higher demand for oil and gas and the continued rise in oil prices which have been lifting oil company shares to new peaks. Crompton Corporation (CK) also enjoyed a stellar ride in February with shares rising 18% after the company reported a narrower fourth quarter loss and a 17% sales growth from the previous year's quarter.
Dow Chemical's (DOW) shares gained 11% in the month hitting a lifetime high. Brazil's state oil company Petrobras and the local unit of Dow chemical agreed to make a feasibility study of a $360 million acrylic acid project at a Petrobras refinery. Shares of Qiagen (QGEN) also rose in the month ending up 13%. The company reported a 75% jump in fourth quarter earnings. Shares of Synthetech (NZYM) sank 24% after the company reported third quarter fiscal 2005 results of a decline in revenue and a wider net loss compared to the year ago period.
The Burrill Nutraceuticals Index gained a healthy 9% in February and is up 8% year to date. Martek Biosciences' (MATK) shares surged 27% after the company announced that it had entered into a 15 year non-exclusive DHA license and supply agreement with the Kellogg Company. Martek, which has DHA in more than two thirds of the world's infant formula and 70% of its producers under license, hopes to penetrate the adult food market with its omega-3 fatty acid supplement. At the end of the month, Standard & Poor's said that it would add Martek to its S&P MidCap 400 Index as of March 1st.
Shares of USANA Health Sciences (USNA) climbed 22% in February as the company announced record financial results for the fiscal fourth quarter and 2004 year. Quarterly earnings were up 44% on net sales growth of 26%. For the year, net sales increased 36% and earnings rose 48%. Whole Foods Market's (WFMI) shares surged 15% after the company reported a 27% increase in earnings for the latest quarter due to store expansions, higher same-store sales and wholesome margins.
Shares of Natural Alternatives International (NAII) plummeted 27% after the company warned that while profit jumped 36% in its fiscal second quarter, higher costs would significantly reduce earnings for the remainder of fiscal 2005.
Founded in 1994, Burrill & Company is a San Francisco-based global leader in life sciences with principal activities in Venture Capital, Merchant Banking and Media. The company publishes an annual book on the "State of the Industry," as well as a range biotechnology/life science newsletters devoted to Canada, China, India and Japan. Full details may be found at: http://www.burrillandco.com
|
