PRINT THIS PAGE Biotech takes it on the chin
06/12/2006. Source:Burrill & Company .
Biotech has been having a bad time of it, says Burrill & Company, but two new biotech firms still managed to launch IPOs in May of this year and two added themselves to the IPO runway. The newest entrants to the biotech IPO class are Novacea and BioMimetic Therapeutics. SenoRx, which makes medical devices for diagnosing and treating breast cancer, is planning an initial public offering for up to $86.25m. Amicus Therapeutics also filed for its IPO. "In May the biotech industry's downward slide, which started a couple of months ago, continued in the wake of a very nervous and volatile market," 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 Burrill Biotech Select Index lost 12% in value and very few companies in the group escaped a downward trend in their stock prices," he added.
To make matters worse was the meltdown of the share price of Neurocrine Biosciences. The company's shares closed the month down a whopping 66% after the FDA said that the 5 milligram and 10 milligram doses of its insomnia drug candidate indiplon were "approvable," but rejected the 15 milligram XR version of the sleeping pill tablets. The FDA decision also had a spill over effect on DOV Pharmaceuticals Inc.'s shares ... the stock also took a beating, closing the month down 62% because it is the developer of indiplon and licensed the compound to Neurocrine and its pharma partner Pfizer. In addition DOV reported that its first Phase III trial of bicifadine in patients with chronic low back pain (CLBP) did not achieve a statistically significant effect relative to placebo.
The company's share price performance was a major contributor to the dismal monthly performance for the Burrill Mid-Cap Biotech Index, which lost over 40% of its value in May and gave back all the gains and then some that it had achieved since the beginning of the year.
"The markets are exceedingly choppy just now, with the DJIA and the NASDAQ both down by 1.7% and 6% during the month, respectively," explained Burrill. "As a result, any disappointing clinical trials news gets magnified and investors gravitate away from biotech, with its higher risk profile.
"While biotech is in the doldrums right now it will recover," noted Burrill, "and it could come as early as next month in the wake of the annual meeting of the American Society of Clinical Oncology (ASCO) in Atlanta, June 2-6. It is the largest and most prestigious venue for releasing new clinical trial data for cancer drugs and biotech is making breathtaking progress against cancer. This may be the triggering event for biotech companies to increase their profile and engender renewed investor confidence."
Almost lost in the focus on the capital markets was the fact that two new biotech firms managed to launch IPOs in May and two added themselves to the IPO runway. The newest entrants to the Biotech IPO Class are Novacea (NOVC) and BioMimetic Therapeutics Inc. (BMTI). SenoRx Inc., which makes medical devices for diagnosing and treating breast cancer, is planning an initial public offering for up to $86.25 million. Amicus Therapeutics, Inc. also filed for its IPO.
Novacea, Inc. priced its offering of 6,250,000 shares at $6.50 per share and BioMimetic Therapeutics, Inc. priced its offering of 4.6 million shares at $8.00 per share. Both had to reduce their price expectations to get the deals done. BioMimetic, which is developing and commercializing bio-active drug-device combination products for the healing of musculoskeletal injuries and disease, had originally filed for a share offering in the range of $11-$13.
"The trend continues for biotechs with an eye on testing the IPO market... deals get done, but on terms that are less than attractive," Burrill commented.
Pharma's appetite for biotechs also continued in May. AstraZeneca, for example, announced its plans to buy Cambridge Antibody Technology (CAT) in a deal valuing the company at $1.3 billion. The news drove CAT's share price up a whopping 82% by month end. Merck scooped up a couple of biotechs - GlycoFi, Inc. a leader in the field of yeast glycoengineering and optimization of biologic drug molecules for about $400 million and Abmaxis, Inc., a company dedicated to the discovery and optimization of monoclonal antibody products for human therapeutics for $80 million in cash.
INDICES
The Burrill Biotech Select Index (-12%)
While not as dramatic as the Neurocrine Biosciences share price decrease but no less significant, was the 30% drop in PDL Biopharma's shares, which were hit hard in May after the company reported disappointing first-quarter results and lowered fiscal 2006 earnings guidance, citing higher research expenses. With the expectation that positive clinical data reported at the June ASCO meeting would boost the value of the share prices of Amgen and Genentech, both companies managed to avoid dramatic decreases, closing the month even and up 4% respectively. Cephalon Inc. and Pharmacopeia reported that they had formed an alliance to jointly discover, develop and commercialize new therapeutic products. Cephalon will make a $15 million upfront payment to Princeton, N.J.-based Pharmacopeia. Cephalon's shares closed the month down 9%, and Geron's shares slid 7% even though it reported the publication of data demonstrating the broad efficacy of GRN163L, its telomerase inhibitor drug, against multiple types of breast cancer cells as well as the significant reduction of metastatic activity in vivo.
The Burrill Large-Cap Biotech Index (-9.6%)
Biogen Idec and Fumapharm AG announced positive results from a Phase II study designed to evaluate the efficacy and safety of BG-12, an oral fumarate, in patients with relapsing-remitting multiple sclerosis (MS). A day later Biogen Idec said that it will purchase privately-held Fumapharma although no financial details were revealed. This news helped the Biogen's shares close in positive territory, up 4%. Genzyme's shares closed down 3% even though they reported that they had launched two new molecular tests for acute myelogenous leukemia (AML).
The Burrill Mid-Cap Biotech Index (-40.87%)
Although New River Pharmaceuticals Inc. had a late month surge in its share price following news that treatment with their investigational drug NRP104 demonstrated statistically significant reduction in the symptoms of Attention-Deficit/Hyperactivity Disorder (ADHD) in children aged 6 to 12 years, its shares still finished down 13%. Shares of Telik Inc. closed down 13% after an analyst downgrade on the news that clinical trial data that would be delayed, despite the company beating Wall Street estimates in the first quarter. The company is currently conducting three clinical trials testing Telcyta as a treatment for chemotherapy-resistant ovarian and non-small cell lung cancer. Senomyx Inc. saw its share price surge 12% by months end following a positive analyst rating.
The Burrill Small-Cap Biotech Index (-7.9%)
Shares of Vivus Inc. was one of the few bright spots and its shares finished up 43% for the month. The company reported positive Phase II trial results for its obesity treatment candidate drug Qnexa. Auxilium Pharmaceuticals, Inc., a specialty pharmaceutical company, also closed in positive territory, up 15%, on the strength of receiving Canadian marketing approval for Testim 1%, its topical testosterone gel, indicated for the treatment of patients with hypogonadism. Vical's shares finished on a positive note, up 22% in May, reporting a collaboration with Japanese company AnGes MG to commercialize Vical's oncology therapy Allovectin-7, which is scheduled to begin Phase III clinical testing. AnGes will give Vical up to $100 million for clinical trials and earn royalties if the drug makes it to market.
The Burrill Genomics Index (-5.9%)
Companies in the genomics space have had a difficult time since the beginning of the year with the Burrill Genomics Index slipping over 20% year- to-date and 6% in May. Biggest loser in the group was Nanogen, Inc. who is collaborating agreement with Finnish genomics company Jurilab, Ltd. to identify and validate new prognostic markers for type II diabetes. Despite the news, Nanogen's shares dipped 17% by the end of the month. Gene Logic, was down 16%, even though it did not report any unfavorable news during the month. Celera Genomics' share value also tumbled 7%. The company, along with the University of California, San Francisco (UCSF), Cleveland Clinic, Case Western Reserve University and Brigham Young University, has discovered two novel genetic markers associated with an increased risk for myocardial infarction (MI), or heart attack. Despite reducing its Q1 06 loss Caliper Life Sciences finished the month down 16%.
The Burrill Biotech IPO Index (-12.4%)
Shares of Threshold Pharmaceuticals lost almost three quarters of their value by months end after the company said the FDA had asked that portions of two clinical trials for its drug TH-070 be halted due to safety concerns. A Phase II clinical trial and a Phase III trial were put on hold after data showed that some patients taking TH-070, for the treatment of enlarged prostate glands, had developed serious liver problems. The 51% loss in share value for once high-flying NitroMed also helped drive the Index down. The maker of BiDil heart-failure drug, approved for use only by blacks, fell short of expectations.
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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