Biotech has October Blues

San Francisco, CA - November 07, 2005

For the second straight month, biotechnology turned in sub-par numbers and, for the first time since February, the Burrill Biotech Select Index was "out performed" by the Dow Jones Industrial Index and the NASDAQ, even though all three indices finished in negative territory at the end of October. The Burrill Biotech Select Index lost almost 4% of its value, while the Dow was only off 1.2% and the NASDAQ losing 1.5% by month end.

The negative trend was a common theme across all of the Burrill Indices, with the exception of the Burrill AgBio Index, which remained just above water.

"We have got used to the Burrill Biotech Select Index and biotech in general racking up impressive numbers during the last several months," 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. "So it takes us by surprise when biotech underperforms the markets. The market was dragged down by general eroding investor confidence fueled by fears of increasing interest rates, mixed earnings reports and weaker fourth quarter estimates from companies, and it pulled biotechnology right along with it.

"We know that this downward shift in biotech's performance on Wall Street does happen periodically-not because biotech's intrinsic value is flagging, but due to general market conditions. Such is the case right now," explained Burrill. "You can see this reflected in the reaction to the news that Chiron (CHIR) received a $62.5 million contract to supply the U.S. government with a vaccine designed to combat the H5N1 bird flu strain. The H5N1 virus is the strain that has recently been found in birds in Europe, and has been getting the most attention for having the potential to cause a worldwide pandemic. Earlier in the year this kind of news would have helped drive Chiron's stock value up considerably, but its share value closed the month up only 1%.

"However, the news that Novartis was acquiring all of the shares of Chiron that it does not currently own for $45.00 per Chiron share, or a total of approximately $5.1 billion, in cash on the last day of October will certainly give momentum to biotech going into November," added Burrill. "In addition, many biotechs are scheduled to report third quarter financials in November and, providing the news is positive, we may see a reversal in the two-month slide that biotechnology has experienced."

The market conditions also hit planned biotech IPOs. Predix Pharmaceuticals, which was looking to sell 5 million shares at $10-$12, withdraw its IPO even though it is well underway with enrollment for a pivotal Phase III clinical trial of PRX-00023 in general anxiety disorder, and expects to initiate a Phase Ib proof of concept study for PRX-08066 in pulmonary arterial hypertension later this year and a Phase II study of PRX-03140 in Alzheimer's disease in the first half of 2006. Predix joined SkinMedica Inc., developer of products to treat dermatologic conditions and diseases, which also withdrew its planned initial public offering of common stock due to market conditions. Before pulling its IPO registration statement with the U.S. Securities and Exchange Commission, the company had planned to sell 5.25 million shares for between $11 and $13 per share.

Accentia Biopharmaceuticals, Inc. (ABPI), however, did get out at the end of October raising $19.2 million through the sale of 2.4 million shares at $8. The price was at the low end of the company's $8-$10 range, and ABPI's post-money valuation was $231 million. The company markets 10 products for pain and cough, cold and allergy and is developing therapeutics for respiratory and critical care oncology indications. Accentia's Biovaxid autologous cancer vaccine is in Phase III testing to treat non-Hodgkin's lymphoma. The company expects its SinuNase amphotericin B suspension to enter Phase III testing to treat chronic rhinosinusitis this year. At month end Accentia closed down $1.00 at $7.00.

"The six recent IPO graduates since August are considerably underwater with the group combining for an average decrease in share price of 21.2%," commented Burrill. "Given the current climate we can expect that the 14 companies on the IPO runway will remain in a holding pattern until conditions improve."

Performance of IPOs completed since August

Biotech Top Dog Watch
On the last day of trading Genentech's (DNA) shares surged 3% and closed the month at $90.60, up 8%. As a result, Genentech regained the top spot as the biotech company with the highest market cap at $96.42 billion. Amgen's (AMGN) shares dropped 5% for the month, closing at $75.77 at the end of October. The company's market cap stood at $93.30 billion.

Burrill Biotech Select Index (down 3.7%, up 11.4% YTD)
A last day of October announcement by Genentech and Biogen Idec, Inc. that the supplemental Biologics License Application (sBLA) submitted by them for Rituxan (Rituximab) for patients with active rheumatoid arthritis (RA) who inadequately respond to anti-TNF therapy had been accepted by the FDA helped ameliorate the loss that the Burrill Biotech Select Index was facing prior to the announcement. Genentech's shares gained 8% during the month. However, investors were in no mood to reward Human Genome Sciences, Inc. (HGSI) for its decreased net loss for the quarter of $54.4 million, or $0.42 per share (compared with a net loss for the prior year period of $62.2 million, or $0.48 per share). Instead, they focused on the company's results of a Phase II clinical trial, which demonstrated that LymphoStat-B (belimumab) was safe, well tolerated, and showed signs of clinical effect in patients with systemic lupus erythematosus (SLE), but did not meet the overall primary efficacy endpoints of reducing the signs and symptoms of SLE. The results drove down the company's share value, which closed the month at $8.33, down 39%.

Icos Corporation (ICOS), even though it announced positive Phase II results from a study of tadalafil in the treatment of lower urinary tract symptoms in men with benign prostatic hyperplasia, closed at $26.98, down 2%. Also dragging down the Select Index was CuraGen Corporation (CRGN) down 7%, and Invitrogen Corporation (IVGN), which closed down 15% after posting earnings of 80 cents a share, which fell short of the average analyst estimate of 88 cents a share.

Burrill LARGE-CAP Biotech Index (down 2.3%, up 17.4% YTD)
Biogen Idec (BIIB) shares, which had tumbled 4% to $38.56 after reporting third-quarter earnings of 8 cents a share, compared with 10 cents a share last year. Although revenue rose, results still fell short of Wall Street expectations. Their last minute news on Rituxan helped reverse the slide and its shares closed the month at $40.63, up 3%. Celgene Corporation (CELG) also finished the month up 3% on news that the European Medicines Agency (EMEA) had accepted for review their Marketing Authorization Application (MAA) for Revlimid (lenalidomide) as a treatment for transfusion-dependent anemia.

Burrill MID-CAP Biotech Index (down 2%, up 1.3% YTD)
Disappointing financial results and the sudden resignation of Diversa Corp.'s (DVSA) president and CEO caused the company's shares to drop 8% in October. Telik, Inc. (TELK) also plummeted 9% in October. The company is proceeding with a study of an oral formulation of Telintra in patients with myelodysplastic syndrome.

Albany Molecular Research (AMRI) disclosed that Bristol Myers-Squibb (BMY) has acquired an exclusive license for its biogenic amine reuptake inhibitors, which are being explored as possible treatments for depression and other central nervous system disorders.

Bristol Myers is paying $8 million up front and will fund Albany Molecular's future research into the compounds to the tune of $10 million. Albany Molecular would receive $66 million per drug for the first two compounds and $22 million for every additional compound, in addition to royalties on sales if any drugs are commercialized. The agreement includes provisions for AMRI to potentially provide additional chemistry services, including manufacturing, should Bristol-Myers Squibb elect to outsource such activities. Albany's shares closed the month up 10%.

Illumina, Inc. (ILMN) had a good month with its shares gaining 22% reporting total revenue for the quarter of $19.5 million, which represented a 44% increase compared to total revenue of $13.5 million recorded in the third quarter of 2004. The company has also made a formal filing with the United States Patent and Trademark Office (USPTO) requesting Interference with U.S. Patent Number 6,858,412. The '412 patent relates to the molecular inversion probe genotyping technology of ParAllele BioScience, which was recently acquired by Affymetrix. The invention at issue, although not currently in use at Illumina, was invented by Illumina scientists during the course of early research and development at the company. Illumina's request for interference is based on an Illumina patent application describing the invention and filed prior to the '412 Patent.

Neurochem Inc. (NRMX) announced that its Independent Safety Review Board (ISRB) has issued a third recommendation to continue the company's North American Phase III clinical trial for Alzhemed, an investigational product candidate for the treatment of Alzheimer's disease (AD). Neurochem shares closed the month up 20% at $15.25

Burrill SMALL-CAP Biotech Index (down 12%, down 19% YTD)
Osteotech (OSTE) fell 41% during the month after the company said the Musculoskeletal Transplant Foundation had withdrawn its unsolicited offer to buy the company. In August the company had spurned the charity's offer to acquire all its outstanding shares for $6.25 a share.

Shares of CancerVax Corp. tumbled even more - 60% - after the company abandoned its lead drug candidate on disappointing trial data. CancerVax and partner Serono SA terminated a Phase III trial of Canvaxin in skin cancer because an interim data analysis showed it was unlikely to lengthen patients' lives. The companies said then that they did not plan to pursue the drug any further. CancerVax plans to completely restructure its operations, cutting its work force to 80 people from 183.

Hemispherx Biopharma, Inc. (HEB) closed up an impressive 66%. The company reported new data on preclinical studies on double-stranded RNA (dsRNA), including Ampligen, one of its flagship experimental immunomodulators that suggested a new, and potentially pivotal, role of dsRNA therapeutics in improving the efficacy of the present standards of care in both influenza prevention and treatment of acute disease.

Positive financial results for LifeCell Corporation's (LIFC) third quarter failed to reverse a 25% drop in share value that had been caused by the company's announcement that it had voluntarily recalled some human tissue products after questions were raised about the company that supplied them.

AVI BioPharma Inc. (AVII) reported that certain combinations of its antisense drugs have reduced genetic replication several-fold in the virus that caused the 1918 Spanish flu pandemic. Lab experiments using several combinations of Neugene antisense drug compounds have reduced viral activity of the H1N1 virus from two- to eight-fold compared to a single agent, leading the company to believe that the compounds, or even a single compound, could be effective in shutting down different flu viruses. AVI BioPharma's shares closed up 35% at $3.56.

Burrill Diagnostics Index (down 4.8%, down 5.8% YTD)
It was a tough month for diagnostics companies. Orchid Cellmark Inc. (ORCH), a leading worldwide provider of identity DNA testing services, reported disappointing financial results and their share price dipped 31% in October. Following suit, although not reporting financials until early October was Sequenom, Inc. (SQNM), down 30% and Third Wave Technologies Inc., (TWTI) a maker of genetic testing products, whose shares

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