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January market jitters fails to derail biotech

February 01, 2008

San Francisco, CA - February 01, 2008

Fears that the economy is not only heading towards a recession but is also rapidly weakening had investors in a skittish mood during January. However, biotech held steady with the Burrill Biotech Select Index closing unchanged well ahead of the NASDAQ, which posted a January loss of 9.9%, and the Dow, which closed down 4.6%.

Healthcare is usually able to ride out extremely volatile capital markets with less damage because they are viewed as ‘safe’ stocks in recession periods, said G. Steven Burrill, CEO of Burrill & Company a San Francisco based global leader in life sciences whose principal activities are in Private Equity, Venture Capital, Merchant Banking and Media, and biotech, on a relative basis, performed well in January.

Helping the cause was the buzz created around the JPMorgan's 26th Annual Healthcare Conference, which continues to set records for attendance during the four day San Francisco-based event. Many of the 300-plus companies, which presented at the event were reporting updated clinical and year end results…and the mood was quite optimistic.

Most notable was Pharmasset, whose shares surged to close the month up 87%. Early in January the company announced positive data from a short-term Phase I study on its hepatitis C candidate, R7128. The four-week trial assessed two doses of Pharmasset's R7128 in combination with the standard of care, Pegasys plus Copegus, in 50 chronically infected patients who hadn't received prior treatment. Pharmasset said 85% of patients given the higher dose, 1,500 milligrams, and 30% at the lower 500 milligram dose had undetectable levels of the virus after four weeks. In comparison, only 10% of patients on the placebo, which was standard of care alone, achieved undetectable levels of the virus.

Pharmasset was the only bright spot amongst a sea of decliners in the Burrill Mid-Cap Biotech Index group as shares of these companies got dragged down with the economic woes. The Index closed the month down 11%.

Investors also seemed to be satisfied with biotech fourth-quarter results, noted Burrill, although they weren’t over-generous in their rewards but they certainly were quick to penalize any companies falling short of expectations. Amgen, for example, hit its projected numbers, but its 2008 outlook fell well below forecasts as sales of anemia drug Aranesp continue to slow in the wake of stricter safety warnings and reimbursement rates. Amgen’s shares closed the month unchanged. Genentech reported solid quarterly results, and its shares jumped 5% in January.

On the other side of the coin, shares of Amylin Pharmaceuticals Inc. took a major hit, dropping 20% in January on the news of a wider fourth-quarter loss. Human Genome Sciences shares lost almost half its value (47%) on the news that the company had scaled back dosing of its experimental hepatitis drug, citing potential health risks. Patients in the final phase of testing of Albuferon will now receive 900 microgram doses of the drug, instead of 1,200 micrograms. Human Genome Sciences is developing its Albuferon with Novartis for the treatment of Hepatitis C. The company believes the drug is as effective as Roche Holdings' Hepatitis C treatment, Pegasys, and would require half as many monthly injections. The company said it continues to expect to have all phase III data available to support the filing of global marketing authorization applications by fall 2009.

Biotech IPOs on hold
The tough economic environment kept biotech IPO hopefuls grounded on the runway in January and only one company—Phenomix, a biopharmaceutical company focused on the development of novel small-molecule product candidates for treatment of Type 2 diabetes and hepatitis C, filed with the SEC for an IPO.

We will see biotech IPOs continuing to getting done, noted Burrill, although valuations will still be problematic and timing challenging. Most of those on file will await better market conditions before beginning their road shows. We certainly expect over 30 IPOs will be completed in the US in 2008 (about the same as 2007), but most will get done in the second half of the year.

About Burrill
Founded in 1994, Burrill & Company is a San Francisco-based global leader in life sciences with activities in Venture Capital, Private Equity, Merchant Banking and Media. The Burrill family of venture capital funds has over $950 million under management and its merchant banking business is one of the industry leaders in life sciences transactions. The company’s 60 person scientific and business team, supported by its 40-person Advisory Boards, the strategic and financial network of its limited partners, and the close relationships developed with numerous life sciences companies and management, provide Burrill with unparalleled access and insight.
Burrill is the creator, sponsor and facilitator of over a dozen leading industry conferences worldwide and publishes a wide range of bio-intelligence reports including: its annual State of the Industry, The Personalized Medicine Report, The Stem Cell Report, and periodic newsletters covering Canada, China, Europe, India, Japan and Partnering/M&A. In association with the California Healthcare Institute, Burrill publishes The Journal of Life Sciences—a bimonthly magazine.

Contact: Peter Winter, Editorial Director 415-591-5474, pwinter@b-c.com

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