Biotech finishes on a high in August, Burrill report says

San Francisco - September 04, 2007

“Biotech rode a surging market in the final trading days on the capital markets before the Labor Day holiday weekend,” 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 Burrill Biotech Select Index closed the month up 4.4% well ahead of the Dow’s 1% gain and NASDAQ’s 2% increase.”

Driving the Burrill Biotech Select Index were Onyx Pharmaceuticals (up 42%) and Vertex Pharmaceuticals (up 21%). Onyx’ jump was based on positive clinical data, while Vertex continued its upward climb as investors continue to bet that telaprevir, the company's experimental hepatitis C drug, will become a blockbuster. Amgen’s woes continued and in the wake of health concerns surrounding its anemia drugs, Aranesp and Epogen, announced that it would shed 12-14% of its employees and cancel nearly $2 billion worth of capital projects. The company’s shares closed down 7% for August and are down 27% year-to-date. It was not so long ago that industry heavyweights Amgen and Genentech were flirting with market caps of $100 billion. At the end of August, Amgen’s market cap stood at $54 billion and Genentech’s market cap was $79 billion.

It was a very turbulent month to say the least with wild swings in the capital markets with investors being spooked by weak economic data and ongoing credit concerns. “We haven’t seen this kind of volatility since 2002,” added Burrill. “At this time five years ago biotech was at its lowest point and since then has been on a steady upward climb driven in large part by biotech’s blue chip companies. Our analysis, in the Burrill Biotechnology Monthly Report, reveals that an investment in biotech at that time would have yielded a very healthy 13% CAGR return so far.

“In addition, the biotech industry is transitioning from one focused principally on treating sickness to one that is promoting ‘wellness’. The era of personalized medicine is upon us...one that emphasizes predictive and preventive medicine,” Burrill continued. “Not surprisingly, diagnostics and nutraceuticals companies have been very successful riding this new paradigm. The Burrill Diagnostics Index, this year to date, for example, is ahead of all other indices and heading into the fall, which is traditionally good for biotech, we expect this trend to continue. In addition, we are seeing companies focused in the personalized medicine space beginning to file for IPO’s and test the appetite of investors for this new market opportunity.”


FDA and biotech

Over the next few months the FDA is scheduled to pass judgment on at least 12 biotechnology-produced medicines. Success for a majority of these could spell a major surge in the industry’s fortunes. “We have already seen a prelude to this with the 42% surge in the value of Onyx Pharmaceuticals’ shares in August following positive clinical data,” noted Burrill, “Onyx and its partner Bayer AG announced an early end to a trial its drug Nexavar in advanced hepatocellular carcinoma. Having been granted priority review status by the FDA, the drug is on the fast track for regulatory clearance.”

Biotech IPO review

It was another slow month for biotech IPOs with only two companies getting their offerings completed. WuXi PharmaTech, a China-based pharmaceutical and biotechnology research and development outsourcing company. The firm raised $212 million offered 15.1 million ADSs, including an over-allotment, at $14 per ADS, a 16.6% premium to the midpoint of its proposed $11 to $13 range. The company’s shares closed the month at $26.25 up 87%. Sucampo Pharmaceuticals, an emerging pharmaceutical company focused on the discovery, development and commercialization of drugs based on prostones, a class of compounds derived from functional fatty acids that occur naturally in the human body. The company priced its 3.75 million shares at $11.50 each, 23% below the midpoint of the proposed $14-$16 price range. Its shares jumped 10.8% by the end of August.

Eight companies added themselves to the IPO runway:

• Adnexus Therapeutics, which is focused on discovering, developing, and commercializing the proprietary drug class called Adnectins. Adnexus’ first product candidate, Angiocept (CT-322), is in Phase 1 clinical development in oncology in the United States. Adnectins are designed and optimized using PROfusion, the company’s patented protein design engine that enables rapid optimization of protein therapeutics.
• Anacor Pharmaceuticals, which is developing novel small-molecule therapeutics derived from boron chemistry. The company has focused initially on developing topical applications of its compounds to treat fungal, bacterial and inflammatory diseases and its most advanced product candidate is AN2690, a topical antifungal in development for the treatment of toenail onychomycosis, which is a fungal infection of the nail and nail bed.
• ARYx Therapeutics, focuses on discovering and developing product candidates designed to eliminate known safety issues associated with commercially successful drugs.
• Biolex Therapeutics is developing recombinant human therapeutic proteins and monoclonal antibodies that, until now, have been impossible or very expensive to develop in existing protein expression systems.
• Genoptix, Inc., a certified laboratory headquartered in Carlsbad, California, provides personalized medicine services to hematologists and oncologists that combine proprietary and exclusive tests with advanced clinical techniques for comprehensive evaluation of individual patients
• Insys Therapeutics, which focuses on discovering, developing and commercializing products to address chemotherapy-induced nausea and vomiting, pain management and other central nervous system disorders.
• Nanosphere, which develops, manufactures and markets an advanced molecular diagnostics platform, the Verigene system, that enables highly sensitive genomic and protein testing on a single platform.
• Precision Therapeutics, which develops and commercializes tests intended to assist physicians in individualizing cancer therapy in an effort to improve treatment outcomes, filed.

“It promises to be an interesting next few months,” said Burrill, “while the industry is still remains at the mercy of the macro-economic climate, the stage is set for biotech to build value and finish the year with a flourish.”

Burrill Biotechnology Monthly Report

The report provides detailed analysis and insight on the progress of the biotechnology industry and examines the performance of each of the 10 Burrill indices.

Contact:
Peter Winter, Editorial Director
Burrill Life Science Media Group
Tel: 415-591-5474
Email: peter.winter@blsmg.com