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Biotech Establishes New Record for Market Cap in AprilMay 01, 2007
San Francisco, CA - May 01, 2007
It wasn’t only the Dow Jones Industrial Average that established a new record in April, breaking through the 13,000 barrier: the collective market cap of the 360 public biotech listed on the Nasdaq and Amex, and monitored by Burrill & Company, soared above $500 billion for the first time in its history. The new mark was set April 17 and since that date it went on to close the month at $507 billion.
“The biotech industry has been growing steadily since its last ‘down cycle’ ended in 2003,” 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. “The growth is even more remarkable when you take into account the fact that we have seen several leading biotechnology companies, with multibillion dollar market caps, being acquired by big pharma and their market cap value removed from the industry’s collective total.
“A good example of this is MedImmune, which currently contributes around $13 billion to the market cap total. With AstraZeneca announcing its intention to acquire the company for $15.2 billion, the industry will need to continue on its upward path to compensate,” noted Burrill. Even with more acquisitions we believe that the industry’s market cap will reach $575 billion by the end of the year.”
In step with the capital markets, the Burrill Biotech Select Index jumped a healthy 5.8% by the end of April. This was just ahead of the Dow, which finished up 5.7% and the NASDAQ, which closed up 4.3%. The positive surge for the industry serves as an excellent “curtain-opener” for the 2007 BIO International Convention being held in Boston May 6-9 when over 20,000 delegates will convene for this major annual event.
“The industry has advanced rapidly since the BIO Convention was last in Boston in 2000,” Burrill said. “That event attracted around 7,000 people and the biotech industry was just starting to command the center of the national and global stage with the interest and excitement surrounding the completion of the Human Genome Project. Now the industry is truly global and more than 70 countries will be represented at this year’s event.”
Strong year for biotech so far
Despite a relatively flat 2006, biotech has come back strong in 2007 with almost all Burrill indices in positive territory year-to-date. Biotech’s elite companies have seen their own share values grow in this period. Amongst the leading gainers in April was Amgen recovering from an indifferent month of March. Demand for Amgen's products remained strong during the first quarter, powering higher profit and revenue for the company. This helped boost Amgen’s share value by 15% by month end. Genentech’s share value, however, did not follow suit falling 3% by the end of the month. The company has extended its current stock repurchase program by an additional $2 billion of its common stock for a total of $8 billion through June 30, 2008. The price movements in April saw Amgen close the market cap gap on its rival Genentech, finishing at $74.3 billion, while Genentech closed at $84.2 billion.
Quiet month for biotech IPOs
Despite the improving environment for biotechs only three IPOs got off the crowded IPO runway at the end of the month:
- Simcere Pharmaceutical, a manufacturer of branded generic pharmaceuticals in China, priced 15.6 million ADSs, including 3.1 million from selling shareholders, at $14.50 per ADS, the top of the proposed $12.50 to $14.50 range. Each ADS will represent two ordinary shares.
- Orexigen Therapeutics, which is developing two drugs for the treatment of obesity, priced its IPO at $12.00 per share, the midpoint of the proposed $11.00 to $13.00 range.
Burrill Biotech Select Index (Month: 5.8% YTD: 10.3%)
There weren’t many negative numbers in the group in April. Genentech closed down 3%. The company did announce it had entered an agreement with Sangamo BioSciences Inc., to provide them with zinc finger DNA-binding protein technology and also produce enzymes to evaluate for drug development. Although Vertex Pharmaceuticals did lose a little ground in April after a Needham & Co. analyst said its hepatitis C drug candidate telaprevir may not go to market until 2010 or 2011, the company’s shares still closed April up 10%. Also driving the index was the 17% share price gains of both Incyte and Celgene. Genomics company, Illumina posted a first-quarter loss of $4 million, or 6 cents per share, compared with a profit of $1.8 million, or 3 cents per share, during the same period a year prior. Revenue fell to $80.4 million from $86.4 million. Illumina’s shares closed up 11%.
Burrill Large Cap Biotech Index (Month: 5.6% YTD: 4.5%)
Genzyme Corp. finished the month up 9% after the company reported higher-than-expected quarterly earnings. The Cambridge, Massachusetts-based company said net income rose to $158.2 million, or 57 cents a share, in the first quarter from $101 million, or 37 cents a share, a year ago. Profit was boosted by increased sales of its drugs for rare and chronic diseases, including better-than-expected sales its newest product, Myozyme, a treatment for the muscle disorder Pompe disease. Myozyme generated first-quarter sales of $37.9 million. Shares of Affymetrix Inc., however, fell 13% in April after the company reported a first-quarter loss on restructuring charges and forecast full-year revenue below what Wall Street expected.
Burrill Mid-Cap Biotech Index (Month: 2.1% YTD: 6.6%)
Low double digit gains were the order of the day for most of the companies in the group. The only blemish was Adolor whose shares went crashing down 59% by the end of the month after its lead compound, Entereg, revealed new safety issues in a trial as a long-term treatment for patients with opioid-induced bowel dysfunction (OBD). Neurochem Inc.’s shares have slipped almost 46% (23% in April) since the beginning of the year. A significant portion of this drop came on their recent announcement that the database for the North American Phase III clinical trial for tramiprosate (Alzhemed) for the treatment of Alzheimer's disease has been locked.
Burrill Small Cap Biotech Index (Month: 7.9% YTD: 8.5%)
Overall, the small-cap companies had a very good month. Inspire Pharmaceuticals' stock price closed April up 34% on the news that it had received FDA approval to sell AzaSite, which treats bacterial conjunctivitis, a type of pink eye. Curis, Inc. selected its first development candidate from its targeted cancer drug development platform. CUDC-101 is a multi-target small molecule where the first active drug component is designed to inhibit an undisclosed target and a second active drug component is designed to inhibit Epidermal Growth Factor Receptor (EGFR). Curis’ shares closed up 36%. Oscient Pharmaceuticals Corporation completed a $60 million debt offering in April and its shares closed up 21%. Interest in drugs to counteract insomnia helped boost Somaxon Pharnaceuticals shares by 50%. Somaxon has completed four successful Phase III clinical trials for its lead product candidate, Silenor (doxepin HCl) for the treatment of insomnia.
Peter Winter, Editorial Director, Burrill & Company
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