PRINT THIS PAGE Biotech pauses for breath
08/02/2006. Source:Burrill & Company.
August is typically a slow month for biotech and last year's figures for the month were no exception, says G. Steven Burrill, CEO of Burrill & Company, noting that the momentum which the industry enjoyed over the previous four months of 2005 tailed off. "After biotech's strong run over the past four months, it was not unexpected that there would be a cooling off period. However, biotech has not been caught in the downdraft affecting other markets but has remained relatively stable during the past four weeks ... and has even shown some strength over the general market.
"With oil prices soaring, the price of a gallon of gas hitting $3 at the pump already, and consumer confidence weakening, the Burrill Biotech Select Index still managed to break even in August beating the Dow Jones Industrial Average, which closed down 1.5% and the NASDAQ, which was also off by the same amount," added Burrill.
Biotech Market Cap Race
Thanks to a last day of the month surge in its share price, and Amgen's shares remaining unchanged for the month, Genentech once again captured top ranking as the biotech company with the highest market cap. Closing at $93.94, Genentech's market cap stood at $99.97 billion, just above that of Amgen, whose market cap was $98.58 billion.
"It is interesting to note in this market cap rivalry that the combined market caps of Genentech and Amgen represents 41% of the collective total of the biotech industry, which at the end of August, stood at $474.13 billion," commented Burrill.
Genentech's share price was boosted on the news that they and Biogen Idec, Inc. (BIIB) had submitted a supplemental Biologics License Application (sBLA) with the FDA for a new indication for Rituxan (Rituximab) in patients with active rheumatoid arthritis (RA) who inadequately respond to an anti-TNF therapy.
The swing towards mergers and acquisitions with the absence of a vibrant IPO window continues. Dominating the headlines in August was OSI Pharmaceutical's (OSIP) acquisition of Eyetech Pharmaceuticals (EYET) for $935 million, representing about $20 per share, a 43% premium over Eyetech's most recent pre-merger announcement closing share price of $14.
"Even though the reaction from the Street to this deal was decidedly mixed, it is unlikely that we have seen the end of high profile M&A's," added Burrill. "With big pharma on the prowl for promising drug candidates to bolster their product pipelines and with many companies still trading at relatively low valuations despite the rebound in the biotech indices in the second quarter, there are plenty of deals yet to be made.
"Nevertheless, we are continuing to see very strong performances from some of the companies in the Burrill Biotech 2003/4/5 IPO Index including New River Pharmaceuticals (NRPH), which, since it went public a year ago, has risen over 400%. It is these types of gains and the general improvement of the recent IPO 'class' that will be the forerunner for an early fall opening of the IPO window," Burrill stated.
"In addition, the recent success of the initial public offering of Coley Pharmaceutical Group Inc. (COLY) earlier in August, which priced six million shares at $16 per share at the top its estimated pricing range should add further confidence for other companies waiting on the IPO runway." The underwriters of the offering exercised in full their over-allotment option to purchase an additional 900,000 shares of common stock at the public offering price of $16.00 per share. With the purchase of the over-allotment shares, and a simultaneous private placement to Coley's collaboration partner, Pfizer Inc., a total of 7,525,000 shares of common stock were sold, resulting in gross proceeds of $120.4 million.
Coley's TLR Therapeutics(TM) act by stimulating toll-like receptors (TLRs), found in and on immune system cells, which, in turn, direct the immune system to fight disease. Coley focuses on drugs for cancers, infectious diseases and respiratory disorders. The company has signed lucrative deals with big- pharma such as Pfizer (PFE) and Sanofi-Aventis (SNY). Shortly after their IPO shares reached $18.45, before dropping back to close out the month at $16.25, an increase of 1.5% from the offering price.
Burrill Biotech 2003/4/5 IPO Index (Up 2.7%, down 6.9% YTD)
The appetite for IPOs, which has been virtually non-existent for almost four months, could return if this IPO class maintains their collective steady improvement. In August, thanks to spectacular gains by Myogen (MYOG), which rose a remarkable 89%, to close at $20.70, the Burrill Biotech 2003/4/5 IPO Index posted a modest gain of 2.7% Although Myogen was trading in the $6 range four months ago, its dramatic increase was fuelled by the news that Myogen's Phase IIb clinical data for its drug darusentan had shown to be effective in treating patients with hypertension who have not responded well to standard drug regimens. The company now plans to proceed with Phase III clinical trials for the drug. Myogen currently has one drug on the market, in Europe, called Perfan, a treatment for heart failure. In addition to darusentan, the company is developing a treatment for pulmonary hypertension called ambrisentan
New River Pharmaceuticals (NRPH) once again posted an impressive 25% gain, closing at $43.09, on news that the company would emphasize its abuse- deterring formulation of hydrocodone, rather than its abuse-deterring formulation of hydromorphone. The company says that it also remains on track to file this fall for FDA approval of its formulation of amphetamine for ADHD.
Also chipping in with solid gains was Eyetech (EYET) following the announcement that OSI Pharmaceuticals planned to acquire the company. Eyetech closed up a respectable 61% at $18.28. MannKind Corporation (MNKD) also closed up 54% for the month. The company completed a $175 million private placement of newly issued shares of common stock and the concurrent issuance of warrants for the purchase of additional shares of common stock.
Not so fortunate was Renovis (RNVS) who announced disappointing results from its Phase II clinical trial studying REN-1654 in patient-volunteers with sciatica, a form of neuropathic pain. The results indicate that, although REN- 1654 showed a positive trend in pain relief, it did not reach statistical significance in its primary endpoint of change in average daily spontaneous pain ratings at the end of a three-week treatment period compared to placebo. Its shares closed at $13.26, down 13% on the month.
Burrill Biotech Select Index (Up 0.38% and 15.8% YTD)
For once, it wasn't Genentech (DNA) or Amgen (AMGN) keeping the Burrill Biotech Select Index in positive territory, with Amgen closing out the month unchanged and Genentech posting a late 5% surge. It was Vertex Pharmaceuticals Inc. (VRTX) that carried the load in August closing up 15% at $18.05. The gain was spurred by analysts at J.P. Morgan who upped their rating of the biotechnology stock to overweight from neutral. They based their upgrade on promising Phase I clinical data on the company's hepatitis C virus (HCV) treatment, VX-950 for which the company expects to be able to file for U.S. regulatory approval in 2008.
CuraGen Corp.'s (CRGN) shares slipped and closed the month at $4.37, down 31%. News that it expects to generate about $21 million in a public offering of its stock to pay down debt was not well received by its shareholders. Its stock is down about 34% year to date.
Burrill LARGE-CAP Biotech Index (up 0.9%, 21.4% YTD)
Shares of Genzyme Corp. (GENZ) were off 4% for the month largely due to a downgrade by Lehman Brothers, who cited risks to long-term growth for a number of the biotechnology company's products. Also dragging the Index into negative territory was Human Genome Sciences Inc. (HGSI), whose shares closed at $12.91, down 12% for August. The news that GlaxoSmithKline (NGSK) had exercised its option to develop and commercialize HGS-ETR1 (mapatumumab) jointly with Human Genome Sciences obviously failed to impress investors.
Burrill MID-CAP Biotech Index (-4.9%, 3.2% YTD)
DOV Pharmaceutical Inc.'s (DOVP) 29% drop in its share price helped contribute to the 5% loss that the Burrill MID-CAP Biotech Index sustained in August. DOV Pharmaceutical suspended further dosing in a pivotal-stage clinical trial of ocinaplon, its experimental anti-anxiety agent, due to concerns about liver enzyme levels. The company said it will continue to monitor the subjects and patients currently enrolled in the trial. Once the analysis is complete, it will decide whether to continue with ocinaplon or select a back-up compound.
Burrill SMALL-CAP Biotech Index (-0.8%, - 10.7% YTD)
Although almost 70% of the companies in the Burrill SMALL-CAP Biotech Index lost ground in August, the Index only recorded a 0.8% drop. The negative numbers were offset in part by NeoRx Corporation (NERX), which was the biggest gainer closing the month at $1.01, up 53%. The company reported a positive second quarter initiating a Phase II clinical trial in patients with small cell lung cancer. NeoRx also joined with The Scripps Research Institute in the first scientific collaboration at Scripps Florida, focusing on developing therapeutic agents to treat cancer. The company believes that this collaboration potentially will offer important opportunities to license novel cancer products for its pipeline.
Although both Aphton Corp. (APHT) and Avancis Pharmaceutical Corp. (AVNC) did not issue any significant news during the month, their stock price dipped by 28% and 37% respectively. In addition, following a decline in its share price Kosan Biosciences Incorporated (KOSN) terminated a planned offering of 4,500,000 shares of common stock. The company's share price closed the month at $7.35, down 18%.
Founded in 1994, Burrill & Company is a 50-person San Francisco-based global leader in Life Sciences Venture Capital, Life Sciences Merchant Banking and Life Sciences Media. The Burrill family of venture capital funds, with over $500 million under management, includes the Burrill Life Sciences Capital Fund, the Burrill Biotechnology Capital Fund, the Burrill Agbio Capital Fund and its successor - the Burrill Agbio Capital Fund II, and the Burrill Nutraceuticals Capital Fund. For more information, please visit Burrill & Company's website at www.burrillandco.com.
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