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Biotech holds steady in January as broader markets head south

February 01, 2010

FOR IMMEDIATE RELEASE
 
 
SAN FRANCISCO - February 1, 2010 – The opening month of 2010 has provided the first real litmus test for the biotech industry. While the test certainly came back positive, G. Steven Burrill, CEO, Burrill & Company, a San Francisco based global leader in life sciences with activities in private equity, venture capital, merchant banking and media says investors need to be cautious in their optimism.
 
At JPMorgan's 28th Annual Healthcare Conference in San Francisco earlier this month analysts were certainly in an upbeat mood about biotech’s prospects for 2010 and on the heels of the conference the fourth quarter financials from the leading blue chip biotech companies did not disappoint.
 
The combination of these two factors helped the Burrill Biotech Select Index beat the general markets closing the month up 1.45 percent with the Dow down 3.5 percent and NASDAQ down 5 percent, respectively. Some analysts believe that this is good for biotech but not a good omen for the general capital markets for the rest of the year, as historically the markets have tended to end in negative territory if they fall in January.
 
“The larger biotech companies are certainly well placed to take advantage of an economy that continues to steadily improve,” says Burrill. “However, the industry overall has emerged into a world where capital, while available, will go to those companies that exhibit less risk with later stage products in their pipeline.”
 
Burrill’s analysis, in his upcoming annual report on the industry – Biotech 2010-Life Sciences: Adapting for Success – reveals those companies that are the most responsive to the changes around them will thrive and be successful. The specter of generic competition and reimbursement pressures will hit the industry hard if it is not fully prepared.
 
Already there is an indication that those emerging biotechs that have survived may again be facing a tough year with both the Burrill Mid Cap Biotech Index and the Burrill Small Cap Biotech Index losing value in January.
 
Analyzing biotech’s monthly performance
 
The Burrill Biotech Select Index was buoyed by Amylin Pharmaceuticals, Gilead Sciences and Illumina. Amylin’s 27 percent jump in its share value was driven by the company’s improved financials and investors hopes that the company’s once-a-week formulation of its diabetes drug Byetta will win U.S. Food and Drug Administration approval.
 
A 42 percent jump in fourth quarter revenues vaulted the shares of Gilead Sciences, which closed the month up 12 percent. In the genomics space, Illumina’s shares closed the month up 19.6 percent. The company introduced a new sequencing system, designed to provide a lower-priced entry point into next-generation sequencing. Shares of Affymetrix, however, closed the month down 10 percent mainly as a result of an analyst’s downgrade.
 
Clinical diagnostic test developer Genomic Health’s shares dropped 15 percent in value in January after it reported that it expects to meet its 2009 revenue guidance, but fourth-quarter results were affected by a delay in receiving payments.
 
IPO News
 
Biotech companies hoping to go public will be watching Ironwood Pharmaceuticals. In late January, the company filed plans with the U.S. Securities and Exchange Commission for an IPO debut that it hopes will bring them $270 million. Ironwood first filed in November with a $173 million target. Its goal is to sell 16.7 million shares at $14 to $16 per share. Linaclotide, the company’s first in class compound, is being evaluated in a confirmatory phase 3 program for the treatment of irritable bowel syndrome with constipation and chronic constipation. Ironwood has already raised $306 million in private equity financing and recently announced that it had partnered with Japanese pharmaceutical powerhouse Astellas granting them exclusive rights to develop and commercialize linaclotide in Japan, Indonesia, Korea, the Philippines, Taiwan, and Thailand.
 
Adding itself to the IPO runway was cardiovascular diagnostic test developer BG Medicine. It plans to raise up to $86.3 million to fund the launch its lead product, a test for heart failure. The company expects to be able to begin marketing the diagnostic test in the United States in the second half of this year, pending U.S. Food and Drug Administration approval.
 
“Given the positive post JPMorgan Healthcare Conference mood, the companies waiting on the IPO runway will be hoping that the markets are now receptive enough to invest in new biotech issues,” says Burrill. “However, with most of the 100 companies that have gone public since 2003 now trading below their initial offering price, the first biotech IPO movers of this year will have to perform well if we are to see the IPO window opening.”
 
 
Burrill Biotech Indices
 
 
INDEX
12/31/08
12/31/09
01/29/10
PERCENT
CHANGE (MONTH)
PERCENT
CHANGE (YEAR)
300.33
312.47
316.99
1.45%
1.45%
Burrill Large Cap
379.7
461.85
470.96
1.97%
1.97%
Burrill Mid-Cap
139.39
166.01
159.41
-3.98%
-3.98%
Burrill Small Cap
78.35
88.12
85.1
-3.43%
-3.43%
Burrill Genomics
59.69
159.87
147.86
-7.51%
-7.51%
Burrill Diagnostics
138.3
147.96
143.23
-3.20%
-3.20%
Burrill Personalized Medicine
79.63
91.71
89.25
-2.68%
-2.68%
NASDAQ
1577.03
2269.15
2147.35
-5.37%
-5.37%
DJIA
8776.39
10428.05
10067.33
-3.46%
-3.46%
Amex Biotech
647.15
941.92
964.34
2.38%
2.38%
Amex Pharmaceutical
272.84
309.21
305.76
-1.12%
-1.12%
 
 
 
About Burrill & Company
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. Burrill is also the creator, sponsor and facilitator of over a dozen leading industry conferences worldwide and publisher of a range of bio-intelligence reports including the monthly Burrill Report and annual “State of the Industry” report.
 
Contact: Peter Winter, Editor, Burrill Report
Tel: 415-591-5474 Email: pwinter@b-c.com
 
 

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