PRINT THIS PAGE Malaise over biotech
15/11/2006. Source:Burrill & Company .
Despite biotech's weak performance during April this year, Burrill & Company notes that three companies managed to get their IPOs off the ground and two more added themselves to the IPO runway. While attention focused squarely on the biotech industry at Bio 2006 in Chicago, which attracted a record 19,479 attendees from 62 countries, the successful event failed to ignite Wall Street with biotech closing out another less than stellar month.
Despite biotech's weak performance during April this year, Burrill & Company notes that three companies managed to get their IPOs off the ground and two more added themselves to the IPO runway.
While attention focused squarely on the biotech industry at Bio 2006 in Chicago, which attracted a record 19,479 attendees from 62 countries, the successful event failed to ignite Wall Street with biotech closing out another less than stellar month.
"Even the Burrill Mid-Cap Biotech Index and Burrill Small-Cap Biotech Index faltered in April following a good first quarter run," said G. Steven Burrill, CEO of Burrill & Company, a San Francisco based global leader in life sciences whose principal activities are in Venture Capital, Merchant Banking and Media. "The biotech sector's 'blue chip' companies are no longer kindling investor enthusiasm despite reporting favorable first quarter financials that met or beat their EPS estimates."
The Burrill Biotech Select Index closed down 6.6% in April while the NASDAQ closed marginally down 0.7% and the Dow closed up 2.3% "There is no doubt that the sector is in a temporary slump right now and underperforming the market. In 2005 large cap biotechs did exceptionally well but that momentum has slowed. Investors are gravitating to other industrial sectors away from biotech now that the US economy is on a roll ... growing at its fastest rate in over two years during the first quarter on strong spending and investment," Burrill explained. "It looks as though investors aren't in the mood to continue to put their faith in even the solid bets like Amgen and Genentech, both of which have seen their share prices drop by approximately 14% each since the beginning of the year.
"There is some real uncertainty in the market following a string of disappointing clinical trial results reported in April by small- to mid-cap biotechs (Inhibitex and CombinatoRx) ... and the widely reported serious adverse drug reaction that occurred in six volunteers in a UK Phase I trial who received an injection of TeGenero's TGN1412 monoclonal antibody that targets the molecule CD28 present on the cell surface of T lymphocytes. TeGenero, a small German biotech company, was developing the drug for treatment of leukemia, rheumatoid arthritis and multiple sclerosis.
"In addition, the FDA has been critical that despite the billions invested in pharmaceutical R&D, last year saw one of the lowest levels of drug approvals for almost a decade. Added to this are tougher regulatory barriers and increased drug safety concerns, an aging population with chronic healthcare costs spinning out of control, Medicare reimbursement issues, the specter of follow-on biologics and biogenerics that have further contributed to a market that is being cautious in its excitement about biotech," added Burrill.
Despite biotech's weak performance during April, three companies managed to get their IPOs off the ground and two added themselves to the IPO runway. Vanda Pharmaceuticals Inc., focused on product candidates for CNS disorders, raised $57.5M in its offering; Targacept, Inc., also targeting central nervous system diseases and disorders, sold five million shares at $9.00 per share in its offering; while Omrix Biopharmaceuticals Inc. raised just over $37 million in its IPO. However, to get their offerings out all companies had to drop well below their original filing ranges. At the close of the month, only Vanda's shares had improved from its offering price -- up 9.5%, Omrix, on the other hand, closed flat and Targacept's shares were down 16%. In April, two new companies added their filings to the IPO runway - Replidyne filed for a $100M IPO and Perlegen Sciences, Inc. filed for a $115M IPO.
Though few and far between, there were some bright spots during the month. "Despite the current uncertainty surrounding certain biotech sectors, investors are warming to the diagnostics space, as they begin to understand the importance that diagnostics plays in an evolving personalized medicine world," said Burrill.
The Burrill Diagnostics Index was one of the few to gain in April led by a 22% jump in share price of Diagnostic Products Corporation, which is being acquired by Siemens for approximately $1.86 billion. DPC is one of the global leaders in immunodiagnostics, focusing on developing, manufacturing and distributing automated body fluid analyzers and tests, such as those related to cancer and cardiac disease, as well as hormone and allergy conditions.
The Burrill Biotech Select Index (down 6.6%)
Amgen's first-quarter sales rose 14% from a year ago, but Wall Street was looking for an even better performance and the company's share price closed down 7%. Genentech also finished the month down 6%. The company announced a profit of 46 cents per share compared with analysts' consensus forecast of 41 cents. A similar fate befell Gilead Sciences, which finished down 8% even though it celebrated its ninth straight quarter of beating analyst estimates. Amylin Pharmaceuticals Inc.'s shares also dipped 11% in April after reporting disappointing first quarter financials.
The Burrill Large-Cap Biotech Index (-5.6%)
Chiron approved an amended merger agreement under which Novartis AG will acquire all Chiron shares it doesn't already own for $48.00 per share in cash. Biogen Idec Inc. reported higher quarterly earnings -- but closed the month down 5%. Biogen and Elan expect to get the green light from the FDA to put Tysabri back on the market, albeit with restrictions, by the end of June.
The Burrill Mid-Cap Biotech Index (-1.85%)
Although Novartis exercised an option to co-develop Idenix Pharmaceuticals' lead drug candidate, valopicitabine (NM283) Idenix shares closed April down 26% on an analyst report that the commercial potential of the drug as limited. DOV Pharmaceutical reported that a Phase III trial of bicifadine for treating chronic lower back pain had failed. Not surprisingly their shares plummeted to a 52-week low and closed down 49%. Balancing out these losses were Illumina Inc. and Aspreva Pharmaceuticals whose shares jumped 33% and 39% respectively on the strength of positive corporate news.
The Burrill Small-Cap Biotech Index (-7%)
Matritech Inc.'s NMP22 BladderChek, a point-of-care urine test, uncovered bladder cancers that standard tests failed to detect. The company's shares closed April up 56%. Matritech, along with Questcor Pharmaceuticals (up 37%) and Somaxon (up 23%) were the only bright spots since 65% of the companies in this group posted share price losses. Acadia Pharmaceuticals, for example, slumped 28%, earlier in the month it had priced a stock offering at $12 per share. The company sold 4.95 million shares, raising net proceeds of about $55.6 million. Curis (-27%), Transgenomic (-25%), Aradigm (-29%), Titan Pharmaceuticals (-27%) and Avant Immunotherapeutics (-29%), all contributed to the negative performance of the Index, which despite this stumble remains 17.6% up for the year-to-date.
The Burrill Genomics Index (-10.3%)
Incyte plunged 31% by the end of April after it disclosed that it would discontinue the development of its DFC drug as a treatment for HIV due to possible side effects. CuraGen dropped 20% in the month even though it reported a smaller loss for its first quarter. Affymetrix also posted a 13% drop in share price following very disappointing financial results. Despite a relative improvement in its earnings, Millennium Pharmaceuticals closed the month down 10%. Gene Logic Inc., which provides analysis and compiles databases for drug developers, posted a wider first-quarter loss, hurt by slumping sales across its businesses. Its share price closed April down 37%. Celera Genomics rose modestly (3%) after the company sold several small molecule drug candidates for the treatment of cancer and other diseases to Pharmacyclics.
The Burrill Biotech IPO Index (- 4.9%)
Somaxon Pharmaceuticals Inc.'s experimental treatment for adults with chronic insomnia helped patients maintain sleep longer than a placebo in its first late-stage clinical trial. The news sent the company's shares up and they closed 23% higher at the end of April. Heading the other way was Inhibitex, which said that its drug candidate Veronate failed to meet its primary endpoint in a Phase III trial designed to show that it lowered the staph infection rate in low birth weight infants. The company's shares closed April down 72%. Shares of CombinatoRx Inc. also plummeted to close the month down 25% after the company said a Phase II trial on its CRx-119 anti- inflammatory drug failed to meet one of its goals.
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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