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Biotech Treads Water in April

May 01, 2008

For the first time since the start of the year, the biotech industry played second fiddle to the major market indices with the Burrill Biotech Select Index, a price-weighted index tracking 20 of biotech’s blue chip companies, finishing unchanged compared to the Dow, which closed up 4.5% and the Nasdaq, which was up 5.9% for the month.

It could have been a lot worse but on the last trading day of the month shares of biotechnology companies in our Burrill Biotech Select Index rose after the Feds cut the federal funds rate by a quarter-point to 2%, said G. Steven Burrill, CEO, Burrill & Company, a San Francisco based global leader in life sciences with activities in Venture Capital, Private Equity, Merchant Banking and Media. Overall, investors continue to value biotech over pharma in this tough economic climate. However, when bad news hits this can dramatically affect a company’s share price value as was witnessed with Affymetrix and Genentech.

For fiscal-year 2008, Affymetrix said that it was reducing its full year revenue guidance to $490 to $510 million, a decrease of approximately 3%. This reduction was in response to expected lower research spending by pharmaceutical and biotech customers. The company is currently reviewing ways to further reduce operating expenses to offset the impact of this revenue reduction. This news was enough to shed 37% off the company’s share value by month end. Genentech and Biogen Idec shares took a hit following news that a Phase II/III study of Rituxan® (rituximab) for systemic lupus erythematosus did not meet its primary endpoint. The study also did not meet any of the six secondary endpoints. Genentech’s shares closed April down 16% while Biogen Idec’s shares closed 1.6% lower.

On the plus side, Takeda Pharmaceuticals’ announced $8.8 billion acquisition of Millennium Pharmaceuticals was enough to help Millennium’s share price to close April up 60%. We will continue to see these marquee deals throughout the year, noted Burrill. Much the same as we witnessed in 2007, the M&A trends that have been hot in biotech land during the past three years will not slow down. Pharma has come to rely on biotech to access pipeline and innovation. Both big pharma and big biotech will continue to compete for companies with advanced product pipelines, as well as important land grabs of technology.

The Burrill Small Cap Biotech Index dropped over 18% in April with companies in this group very much at the mercy of the prevailing market conditions. Neurogen Corp., for example, saw its share value erode by over 44% in April on their announcement that it expected to delay the schizophrenia trials of its main drug candidate and cut jobs for the second time this year.

Biotech IPOs come to a stop
With only one biotech IPO completed since the beginning of the year and none in April, the window for biotech, while remaining open, is not finding any companies ready to go through it right now, said Burrill. The first half of this year will continue to be dominated by the macro economic factors such as inflation, recession and credit market turmoil. In the second half of the year conditions will improve and we will see biotech offerings re-emerging.

Market cap
The industry’s market cap closed at $446 billion, virtually unchanged for April. Genentech’s market cap closed the month at $71.8B; Gilead Sciences was at $48B and Amgen remained in third place at $45.5B.

Biotech Indices

Index
12/31/07
3/31/08
4/30/08
% Change Month
% Change Year
Burrill Biotech Select
331.52
330.24
329.52
-0.22%
-0.60%
Burrill Large Cap Biotech
437.71
437.02
444.63
1.74%
1.58%
Burrill Mid-Cap Biotech
201.89
155.2
157.93
1.76%
-21.77%
Burrill Small Cap Biotech
137.6
146.74
119.65
-18.46%
-13.05%
Burrill Genomics
104.29
88.3
91.48
3.60%
-12.28%
Burrill AgBio
198.83
185.94
170.78
7.34%
0.38%
Burrill Industrial
158.66
159.98
$146.41
6.75%
7.64%
Burrill Diagnostic
159.43
142.23
149.65
5.22%
-6.13%
Burrill Nutraceutical
593.04
536.46
515.8
-3.85%
-13.02%
NASDAQ
2652.28
2279.1
2412.8
5.87%
-9.03%
DJIA
13264.82
12262.89
12820.13
4.54%
-3.35%
Russell 2000
766.03
687.97
715.94
4.07%
-6.54%
Amex Biotech
786.5
737.41
745.53
1.10%
-5.21%
Amex Pharma
338.52
295.23
300.05
1.63%
-11.36%

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 and online at www.tjols.com.

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

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