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Biotech’s Mid Caps Post Solid Gain in February

March 03, 2006

San Francisco, CA - March 03, 2006

In a relatively quiet month, the biotech industry managed to outperform the markets with the Burrill Biotech Select Index up 4.5%, while the NASDAQ finished down 1% and the Dow up 1%. In addition, the biotech industry reached a significant milestone in its comparatively short history with its collective market cap topping the $500 billion mark for the first time.

“However, the unfolding story continues to be the excellent performance of the mid-cap biotech companies," said G. Steven Burrill, CEO of Burrill & Company a San Francisco based global leader in life sciences with principal activities in Venture Capital, Merchant Banking and Media. “The almost 30% gain, and 13% in February, in the Burrill Mid-Cap Biotech Index since the beginning of the year demonstrates that investors believe there is plenty of upside in these emerging companies.

“With U.S. spending on prescription drugs projected to more than double in the next decade, to $446 billion from $188 billion, according to the Centers for Medicare and Medicaid Services latest estimate, the future looks bright for these biotechs. Drug sales, bolstered by Medicare coverage, is expected to keep rising and biotechs will certainly capture a significant portion of this increase,” noted Burrill.

Even the biotech initial public offering market is off to a strong start in 2006,” added Burrill. “The five new IPO companies have raised $231 million and Q1 06 is well on pace to beat the amount raised in Q1 05.

“With three more companies adding themselves to the IPO runway in February all the signs indicate that our prediction of 30-plus biotech IPOs by the end of the year is on track.”

Hitting Wall Street in February was: Valera Pharmaceuticals Inc., Iomai Corporation and Acorda Therapeutics, netting $34 million, $35 million, and $33 million respectively. Two of the three, Valera and Acorda were up by ten or more percent on their first trading day, but were unable to maintain this momentum with Valera, a specialty pharmaceutical company concentrating on the development, acquisition and commercialization of products for the treatment of urological and endocrine conditions, diseases and disorders dropping 3% below its opening price before rallying late February to close the month at $9.84, up 9%. Acorda, whose lead product candidate, Fampridine-SR, is in a Phase III clinical trial for the improvement of walking ability in persons with multiple sclerosis, closed at $6.20, up 3%. For Iomai, which is focused on vaccines and immune system stimulants delivered to the skin, it has been all downhill since its IPO debut. The company closed February at $5.41, down 22%.

The companies filing for IPOs in February were QuatRx, Biomimetic Therapeutics and Novacea.

It wasn’t all about biotherapeutics in February. Industrial biotechnology, particularly biofuels, grabbed some of the headlines. “President George W. Bush's State-of-the-Union address gave a boost to industrial biotechnology,” commented Burrill. “Citing that our nation is ‘addicted to oil’ the President’s proposed a 22% increase in clean energy research at the Department of Energy, including funding for research in cellulosic ethanol, will be welcome news to this biotech sector.

“The technology is ready today and sustainable agricultural feedstocks are abundantly available in most states. The President’s biofuels initiative can help bring cellulosic ethanol to fueling stations throughout the country within a few short years, if we can build the biorefineries needed to produce large volumes of this domestically grown fuel,” added Burrill.

INDICES

The Burrill Biotech IPO Index again reflected the market’s interest in the small and emerging biotech companies posting a jump of 6.8% in its value in February and adding to its 19% growth year-to-date. Most actively moving stocks were: Xenogen Corp., maker of advanced imaging systems including instruments, biological solutions and software, rose 39% by the end of the month on the news that it had agreed to be acquired by Caliper Life Sciences Inc. for $80 million. Barrier Therapeutics Inc. (up 33%) – the company received approval for an ointment designed to treat diaper rash complicated by fungal infections. Santarus Inc. obtained up to $75 million in equity financing over a three-year period. The company’s shares finished February up 19%. Avalon Pharmaceuticals, Inc. (up 28%) reported that it had completed a three week dosing regimen in its Phase I clinical trial of AVN944 in patients with advanced hematological malignancies.

The Burrill Large Cap Biotech Index remained flat in February a situation that the Index has reflected since the beginning of 2006. The only bright spots were Biogen Idec, Celgene and Human Genome Science, closing up 6%, 7% and 14% respectively. One year ago the biotech world was rattled by the startling news that Biogen Idec and partner, Elan were pulling their new drug for multiple sclerosis, Tysabri (natalizumab) from the market. This particular drug, the first new type of drug in eight years to treat MS, had been heralded as a blockbuster with analysts predicting sales as high as $3 billion a year. This month the FDA removed the clinical hold on studies of Tysabri and will allow clinical trials to go forward in patients with MS who were previously treated with the drug. Biogen-IDEC had suspended marketing and clinical trials after three patients developed progressive multifocal leukoencephalopathy, a frequently fatal infection of the brain, two following treatment with natalizumab for MS, and one was being treated for Crohn's Disease. The drug has not being placed back on the market.

Despite reporting a widened fourth-quarter loss Human Genome Sciences closed the month up 14%. Shares of Millennium Pharmaceuticals Inc. weakened to close at $10.48, up 1% for the month, after an analyst saw faster than expected pressure on its Velcade cancer drug from Celgene Corp's Revlimid. Genentech Inc. and Roche Holdings temporarily suspended enrollment in a large-scale, late-stage clinical trial of Avastin, a colorectal cancer drug, over safety concerns. Genentech shares were unchanged, closing the month at $85.69.

The Burrill Mid-Cap Biotech Index, which started out the year on a tear kept up the momentum with a stellar 12.7% gain in February and is up almost 31% year-to-date. Adolor Corp. and Aprevea led the charge. Adolor completed a $143.75 million public stock offering selling 5.75 million shares of common stock at $25 per share. The net proceeds from the offering were about $135 million. Its shares closed the month at $27.44, up 79%. Shares of Aspreva Pharmaceuticals soared 31% during February after the British Columbia-based company reported better-than-expected 2005 sales. Full year revenues were $76.5 million with earnings of $0.62 per fully diluted share, well above the $65 million to $70 million it previously forecast.

Following a meeting with the FDA, Dov Pharmaceutical said that it was on track to submit its new drug application for bicifadine, a treatment for low back pain, in the first half of 2007. Its share price jumped 25% in the month to close at $19.25. Digene Corp. posted a sharply higher quarterly profit as demand increased for its test to help screen for cervical cancer. Shareholders liked what they heard and pushed the company’s share price up 25% by months end. Pain Therapeutics, Inc. and its partner King Pharmaceuticals, Inc. reported that they were commencing a pivotal Phase III trial with Remoxy in 400 patients with severe chronic pain. Remoxy, an investigational drug, is an abuse-resistant version of long-acting oxycodone, a strong opioid painkiller. Pain Therapeutics’ shares closed the month up 17%.

Idenix Pharmaceuticals, Inc. was not rewarded though it reported some positive news that they and Novartis had submitted a Marketing Authorization Application (MAA) to the European Medicines Agency (EMEA) for a 600 mg dose of telbivudine for the treatment of chronic hepatitis B - the company’s share closed down 10%. Albany Molecular Research suffered a drop of 20% in share value in February - reporting a net loss of $942,000 for the fourth quarter, as royalty revenue fell with the launch of a generic containing the active ingredient for Allegra. In January, Albany and Aventis Pharmaceuticals lost a motion in New Jersey to block Barr Pharmaceuticals Inc. and Teva Pharmaceutical Industries Ltd. marketing a generic of the antihistamine. The case is under appeal.

The Burrill Small-Cap Biotech Index posted a modest 1.25% gain in value in February and is up 23% year-to-date. Several companies posted impressive gains in the month. Hemispherx Biopharma’s shares climbed to close up 44% after reporting that its antiviral drug Ampligen can be highly effective in boosting the power of the avian flu-fighting drugs Tamiflu and Relenza, and avian flu vaccines. CancerVax leapt 56% in February. Its stock price has been rising steadily since the company announced in January that it planned to merge with German biotech group Micromet. Titan Pharmaceuticals Inc.’s drug, Spheramine, which is being developed with Schering AG to treat Parkinson's disease, has been granted fast-track designation and a late stage Phase II trial is planned. Titan’s shares closed February up 80%. Another impressive jump of 68% was recorded in the shares of NeoRx Corp. The company, which is developing oncology drugs, signed a deal for $65 million in new private financing. Aridigm dropped 27% on weaker 2005 revenues and even though Cerus Corp. posted positive end of year financials its shares closed the month down 24%.

The Burrill Genomics Index continued its slide in February (down 0.4%) and is down 5% since the beginning of the year. Nanogen posted a drop of 17% in its share value after reporting a net loss of $96.5 million for its 2005 fiscal year compared to a net loss of $38.9 million in 2004. Leading gainer was CuraGen Corp. (up 26%) after Piper Jaffray raised its investment rating on the biotechnology company's shares. This was based on the potential of its PXD101, a therapy to help patients with multiple myeloma. The Phase II results are expected mid-year. Caliper Life Sciences, Inc.’s share also jumped 13% in February. The company reported a 12% increase in revenues on the strength of its microfluidics and liquid handling instrumentation sales.

Index
12/31/05
Value
1/31/06
Value
2/28/06
Value
PPercent Change
For Month
Percent Change
YTD
Burrill Biotech Select Index
351.39
354.05
369.83
4.46%
5.25%
Burrill LARGE-CAP Biotech Index
454.56
451.47
430.52
-4.64%
-5.29%
Burrill MID-CAP Biotech Index
155.59
180.60
203.53
12.70%
30.81%
Burrill SMALL-CAP Biotech Index
125.73
153.31
155.28
1.28%
23.50%
Burrill Genomics Index
117.19
111.25
110.82
-0.38%
-5.43%
Burrill Biotech IPO Index
65.08
72.42
77.38
6.85%
18.90%
Burrill Agbio Index
113.15
119.95
119.96
0.01%
6.02%
Burrill Industrial Biotech Index
124.97
131.22
131.58
0.28%
5.29%
Burrill Diagnostics Index
105.61
108.33
108.85
0.48%
3.07%
Burrill Nutraceuticals Index
439.42
469.69
472.44
0.58%
7.51%
Burrill Life Science Composite Index
231.35
243.68
244.82
0.47%
5.82%
NASDAQ
2205.32
2305.82
2281.39
-1.06%
3.45%
DJIA
10717.50
10864.86
10993.41
1.18%
2.57%
Russell 2000
673.22
733.20
730.64
-0.35%
8.53%
About Burrill & Company
Founded in 1994, Burrill & Company is a San Francisco-based global leader in life sciences with principal activities in Venture Capital, Merchant Banking and Media. The company publishes an annual book on the "State of the Industry" – the 20th Edition, Biotech 2006-Life Sciences: A Changing Prescription, will be available in March 2006. Burrill also publishes a range of biotechnology/life science newsletters and reports and is also the sponsor and facilitator of over a dozen leading industry conferences. Full details may be found at: http://www.burrillandco.com/

Media Contact:
Peter Winter, Director of Communications
Tel: 415-591-5474
Fax: 415-591-5401
pwinter@b-c.com

 

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