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Biotech Remained Flat in May

June 06, 2007

San Francisco, CA - June 06, 2007

The summer blues seem to have started early for biotech. Despite a record setting attendance of over 22,000 at the Biotechnology Industry Organization International Convention in Boston, a nearly 15% increase from the previous year, the event failed to boost the industry on Wall Street. Overall it was a generally a lackluster month for biotech in the capital markets. The Burrill Biotech Select Index closed up 1.7% in contrast to the general markets, which continued their bullish run. The Dow Jones Industrial average jumped 4.3% reaching a new high of 13,633 before closing May, down 6 points from this high, and the NASDAQ closed the month up 3.1%. The positive markets were driven by investors growing more confident that the Federal Reserve might cut interest rates in the second half of 2007.

“Biotech’s positive run came up short in May after posting positive numbers for the previous four months,” said G. Steven Burrill CEO, Burrill & Company, a San Francisco based global leader in life sciences whose principal activities are in Venture Capital, Merchant Banking and Media. “Investors may have been spooked by all the negative publicity surrounding safety concerns over GlaxoSmithKline’s diabetes drug Avandia, disappointing clinical results from several companies and an advisory committee of the FDA recommending that Amgen Inc. should be required to further strengthen the warning labels of its anemia drugs Aranesp and Epogen and conduct additional studies to prove their safety. The news played havoc with the company’s shares, which ended down 12% for the month.

“The markets for some biotechs, were holding back on the eve of the premiere oncology conference, ASCO (American Society of Clinical Oncology), in Chicago. As always, the conference brings together the world thought leaders in oncology and the latest results from the most promising therapeutic compounds. For cancer, the development of targeted therapies will also be front and center at the meeting,” noted Burrill, “the 5000 presentations spread out over five days, could very well set the tone for the fortunes of the industry for the second half of the year.”

Stem cell companies receive a boost
Stem cell technology proved therapeutic on two fronts in May. First, California’s Supreme Court rejected appeals by opponents of Proposition 71, the first Stem Cell research program financed by any state, removing the final obstacle to freeing up to $3 billion in bond sales approved by state voters in 2004. The second came with news from Geron Corporation that its scientists, in collaboration with scientists at the University of Alberta, have differentiated human embryonic stem cells (hESCs) into islet-like clusters (ILCs) that secrete insulin in response to elevated glucose levels, thus demonstrating the feasibility of producing therapeutic cell types from hESCs for the treatment of diabetes. The news boosted Geron’s stock 15% in one day, and its shares closed up 26% for the month.

“For many who believe that stem cells will have a huge impact on the future of medicine the Supreme Court’s decision is a huge relief,” commented Burrill, “the California Institute for Regenerative Medicine is now free to sell bonds to get on with its work.”

Consolidation continues…
As Washington worked on trade legislation easing the rules on generics, Mylan Labs agreed to pay $6.6 billion to acquire the generics unit of Merck KGaA, creating a global powerhouse with combined revenue of $4.2 billion in 2006. Among biotechs, Hologic Inc. will pay $6.2 billion for Cytyc Corporation, combining two major players in women’s health care. Both companies specialize in screening tools and medical devices for women’s health and the combined companies will create a strong sales force in the US. At the end of May, Genzyme announced its intention to buy BioEnvision for $345 million in cash, to enhance its oncology business. This deal might have difficulty going through because the offer is considered as undervalued by a major shareholder. Genzyme said the move helps enhance its oncology offerings because it will receive exclusive, worldwide rights to clofarabine, a drug Bioenvision and Genzyme co-developed in Europe. All in all a busy month on the M&A front.

IPOs still getting done
It was a relatively good month for biotech IPOs with four companies getting their IPOs done in May:

  • Sirtris Pharmaceuticals, which is developing drugs to treat age-related diseases including metabolic diseases such as type 2 diabetes, went public at $10 per share, the midpoint range, raising $69 million. After their debut, the company’s shares shot up and by the end of the month had gained 29%.
  • Biodel, which is developing new treatments for diabetes and osteoporosis, went public at the midpoint of their proposed pricing range at $18 per share, raising $82.5 million, At months end the company’s share value had risen 20%.
  • Helicos BioSciences, a genomics company, reduced its IPO price to $9 per share, raising $48 million. The company’s shares were down 6% at the end of the month.
  • NeurogesX, which is developing novel pain management therapies, priced its share offering at $11 per share, below their original planned price of $13 to $15 per share. By months end the company’s shares were down 20%, trading at $8.10.

Industry Market Cap
Although the collective market cap of the biotech industry dipped below its record setting $513 billion total, set in April, it did manage to recover towards the end of May and close at $506 billion.

MAY INDICES 


Contact: Peter Winter, Editorial Director
Burrill Life Science Media Group
Tel: 415-591-5474
Email: pwinter@b-c.com

 

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