Biotech remains on a roll in July

San Francisco, CA - August 01, 2005

Any thoughts that July would be a quiet month for the biotech sector and the markets in general were quickly dispelled following a very active month. Despite some market apprehensions caused by the Chinese yuan revaluation and the tragic events surrounding the bombings in London's transit system, the markets closed the month with very positive gains. For the month, the Burrill Biotech Select Index gained 8.5%, the Dow closed up 3.5% and NASDAQ was up 6.2%.

"The number of companies whose second quarter earnings exceeded expectations was much higher than expected," 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, "and this helped to drive the markets into positive territory. NASDAQ, for example, broke through a four-year high in the month as technology continued on a roll, with the index up 13.7% over the past three months.

"Biotech has been leading this technology charge. Since April, the Burrill Biotech Select Index has risen 18.4% and it is tempting to report that industry has finally turned the corner in the wake of another very positive month," said Burrill. "However, the industry will need to maintain this momentum well into the fall before we can say this rally will continue through the end of 2005.

"In fact, while we won't be able to pronounce that biotech is fully back on track until the IPO window re-opens late 3Q 05, the line-up on the biotech IPO runway continues to lengthen and signs that Wall Street's appetite for these new issues will again be visible just after Labor Day. In the meantime, M&A continues to be the favored exit for investors at this point, -- a trend that it likely to be maintained through the fall.

"Biotech may receive a further boost this fall if the US Senate votes in favor to expand federal funding of embryonic stem cell research, said Burrill. "The bill introduced by Rep. Michael Castle, R-Del., has already passed the U.S. House of Representatives with a strong bipartisan majority. Although currently locked in procedural debate, the likelihood of a positive outcome just got better following the announcement, at the end of July, that Senate Majority Leader Bill Frist has endorsed the legislation, which is designed to overturn the limits imposed on the research by President Bush in 2001. Frist has put off an anticipated July vote on the legislation until at least September or October."

Amgen roars back
As if spurred by being relegated from its number one position as biotech's market cap leader, Amgen (AMGN) has again regained top spot with its share price surging to a 52-week high thanks to reporting stellar second quarter earnings. The company reported adjusted earnings per share for the second quarter of 2005 of 88 cents, an increase of 42% compared to 62 cents during the second quarter of 2004, with the company showing growth in its approved drugs and progress with drugs in clinical trials. The results were 10 cents per share higher than analysts expected. Amgen's share price closed the month at $79.77, up 32%, and its market cap standing at $98.7 billion. The company also reported on positive data coming out of the clinic for Aranesp, an anemia drug, in a Phase III trial against myelodyplastic syndromes, a bone marrow disease.
For its part, Genentech (DNA) also had another excellent month reporting that it had licensed exclusive rights to use ImmunoGen, Inc.'s (IMGN) Tumor-Activated Prodrug (TAP) technology with therapeutic antibodies to an undisclosed target. This is the third such license to be taken by Genentech. In addition to this license, Genentech previously licensed exclusive rights to use ImmunoGen's TAP technology with therapeutic antibodies to another undisclosed target and to use it with therapeutic antibodies to HER2. Although the company's share price closed up 11% at $89.45, its market cap stood at $94.4 billion, thereby ending Genentech's brief reign as the industry's leading biotech company by market cap size.
"The Amgen, Genentech rivalry for top market cap spot captured the attention of Wall Street and the media alike," said Burrill. "This coupled with biotech companies reporting positive earnings and big pharma deals have had a very positive effect on the industry as a whole.
"Also, while it received much less fanfare than it deserved, the Senate's decision to confirm President Bush's pick of Lester B. Crawford to head the FDA is very good news for biotech," commented Burrill. "The Agency's top post has been vacant for nearly a year and a half and, as we have witnessed, it has been through a very tough period. Crawford takes over the FDA at a time of close public scrutiny over how it handles approvals and safety monitoring for drugs and having a capable leader at its helm, and one who has experienced these issues first hand as acting commissioner will be important for the Agency."

INDICES
Burrill Biotech Select Index (up 8.5%, 16.3% YTD)
In addition to Amgen, Maxygen, Inc. (MAXY) closed with a significant 30% boost in its share price. The increase was driven by strong financial results for the second quarter. Maxygen currently has an improved interferon alpha in development with Roche for the treatment of hepatitis C and hepatitis B viral infections. The company is also on track to file an IND for its improved G-CSF product in 2006. Maxygen is currently developing a novel G-CSF to treat neutropenia that may have significant advantages over the currently marketed G-CSF products.

Geron Corporation (GERN) announced that it had entered into a collaboration and license agreement with Merck & Co., Inc. (MRK) to develop a cancer vaccine targeting telomerase utilizing Merck's expertise in vaccine technologies. Under the terms of the agreement, Geron will receive an upfront payment, milestone payments upon achievement of certain development and regulatory events, and royalties. Merck has also agreed to acquire equity in Geron at a future date as part of Geron's next round of financing. Additional financial terms were not disclosed.

In addition, Merck has acquired an exclusive option to negotiate a separate agreement for Geron's dendritic cell-based telomerase vaccine currently in Phase I/II clinical trials at Duke University Medical Center.

Geron and Merck have jointly developed a research and development plan to optimize and expedite the demonstration of efficacy and tolerability of a potential vaccine against telomerase using Merck's platform. Meanwhile, Geron will continue development of its dendritic cell-based vaccine product, which is currently in Phase I/II clinical trials and is the subject of the exclusive option obtained by Merck.

Telomerase is an enzyme, active in most cancer cells, that maintains telomere length at the ends of chromosomes. This activity confers replicative immortality to the cells in the tumor, allowing the cancer to grow and metastasize over long periods of time. Because telomerase is inactive or only transiently expressed in normal human tissues, and is critical to the growth and progression of most cancer types, it is regarded as a universal and specific cancer target. Geron's shares closed at $10.95, up 41% for the month.

Burrill LARGE-CAP Biotech Index (up 11.3%, 20.2% YTD)
Driven by Amgen and Genentech, the Burrill Large-Cap Biotech Index is on track to post impressive gains by year-end. Also helping the Index close with an 11% gain this month was Genzyme (GENZ) whose share price hit a record high after the company reported that its profits jumped 58% in their second quarter. The company's stock price closed at $74.41, up 24%. Celgene (CELG) posted a gain of 18% following the trend of reporting impressive revenue growth in its second quarter thanks to strong Thalomid sales. The company also said that it expects to meet or exceed its previous guidance for the full year. Biogen Idec (BIIB) also posted better than expected second quarter results and was rewarded with a jump in its share price, closing at $39.29, up 14%, but still down 41% YTD.

Burrill MID-CAP Biotech Index (up 7.9%, 8.7% YTD)
The only company in the Index to post a drop in its share price was Pain Therapeutics Inc. (PTII) who posted a wider second-quarter loss. The company has several leading drug candidates in late-stage clinical trials, and these activities helped push up research and development costs. The company share's closed at $6.01, down 11% for the month. Many of the other companies in the Index recorded significant gains including Exelixis, Inc. (EXEL) who reported that it had initiated a Phase I clinical trial to evaluate the safety, tolerability and pharmacokinetic profile of XL820, a small molecule anticancer compound. Exelixis closed up 19% at $8.86. Neurochem Inc. (NRMX) was also up 11% at $11.13. The company reported the completion of recruitment of 950 patients with mild-to- moderate Alzheimer's Disease (AD) for its North American Phase III clinical trial for Alzhemed. their investigational product candidate for the treatment of AD. The trial is being conducted in 51 U.S. and 17 Canadian clinical centers across North America.

Burrill SMALL-CAP Biotech Index (up 18.5%, down 9.9% YTD)
The revival in the fortunes of biotech companies is particularly evident among the 50 companies representing the Burrill Small-Cap Biotech Index. Over the past three months the Index has shown a 25% improvement and has served to reduce the significant losses suffered in the first quarter of the year. Big winner this month was Sirna Therapeutics (RNAI), which closed the month at $4.25 up a whopping 143%. Investors' enthusiasm for the company's shares were hightened on the news that they had published results of research in Nature Biotechnology of a breakthrough study demonstrating a 95% knockdown of hepatitis B virus (HBV). In the study, Sirna used its chemically optimized short interfering RNA (siRNA) at 1, 3 and 5 mg/kg together with encapsulation and delivery technology provided by Protiva Biotherapeutics Inc., a technology spin-out from Vancouver-based Inex Pharmaceuticals Corp. This is the first demonstration of systemic siRNA efficacy at therapeutically relevant doses and establishes a strong scientific foundation for broad human application of RNAi-based therapeutics. The study demonstrated that Sirna's chemically optimized and encapsulated siRNAs have high potency and prolonged duration of activity in vivo.

Burrill Genomics Index (up 3.35%, up 4.8% YTD)
Although Affymetrix (AFFX) was a big loser, companies in the genomics space continue to do well in an evolving personalized medicine environment. Exemplifying this trend is Gene Logic Inc. (GLGC) whose main business focuses on genomics and toxicogenomics for which revenues increased 12% in their second quarter. Also during the month, the company signed an agreement with GE Healthcare for the global distribution of its new Sciantis System, an online gene expression analysis system designed to help researchers profile the expression of human, rat and mouse genes in normal and diseased tissues. Shares of the company closed at $4.92, up 49%.
In addition, Caliper Life Sciences (CALP) posted a 7.5% increase in second quarter revenues on sales of its advanced liquid handling and LabChip technologies. At $7.01, its share price was up 25% by month end.
Human Genome Sciences (HGSI) also posted a very respectable 27% gain on its share price by month end following its 2Q report of sharply higher revenue and reduced losses. Human Genome Sciences credits the rise in revenue to a milestone payment from GlaxoSmithKline (GSK) as part of the licensing agreement for its Albugon, a potential treatment for diabetes. Human Genome Sciences has said milestone payments from the agreement could be worth as much as $183 million. GSK has also exercised its option to develop and commercialize LymphoStat-B, a potential treatment for rheumatoid arthritis, jointly with Human Genome Sciences. The companies will share equally in LymphoStat-B Phase III and Phase IV development costs, as well as sales and marketing expenses and profits of a commercialized product.

Punctuating a string of positive second quarter numbers was the disappointing results posted by Affymetrix. Although its second-quarter net income rose to $7.8 million, or 12 cents a share, from a profit of $7 million, or 11 cents a share, in the year-earlier period, analysts were expecting a profit of 17 cents a share on revenue of $88.1 million. This news was further compounded by the fact that Affymetrix said that it expects to take a loss of 6 cents a share, including a charge related to its pending acquisition of ParAllele BioScience Inc., on revenue of about $95 million. The Street was looking for net income of 29 cents a share on $101.7 million in revenue. Affymetrix closed at $46.69 down 13% in July

Burrill Biotech 2003/4/5 IPO Index (up 11.9% down 9.3% YTD)
Like its Small-Cap Biotech Index counterpart, the Burrill Biotech 2003/4/5 IPO Index has had a tough 2005. Nevertheless, its 11.9% gain in July is indicative of the overall improvement in the biotech sector in the past three months.

"Although the IPO window for biotechs still remains closed, the turn around in the fortunes of many of the recent IPO graduates should be encouraging for the 19 companies who have filed for an IPO," commented Burrill. "The fourth quarter of 2005 will be a stellar IPO season, with both new issues and existing IPOs performing well," predicted Burrill

The Index benefitted from stellar gains in the share prices of Favrille Inc. (FVRL) - up 18%, Myogen Inc. (MYOG), up 57%, Auxillium Pharmaceuticals Inc. (AUXL), up 34%, and CancerVax Corporation (CNVX), up 39%. The increases weren't driven by any major company events in the month but more by the bullishness of the sectors that they are focused on - namely cancer and cardiovacular diseases. Myogen, Inc., for example is focused on the discovery, development and commercialization of small molecule therapeutics for the treatment of cardiovascular disorders. It has recently completed the enrollment of 187 patients in ARIES-2, one of the Company's two pivotal Phase III trials of ambrisentan in patients with pulmonary arterial hypertension (PAH). The company expects to report top line results of the trial by the end of this year.

About Burrill
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 was a logical extension of G. Steven Burrill's over-37-year involvement in the growth and prosperity of the biotechnology industry. Mr. Burrill's respected reputation has positioned the firm as a prominent and preeminent venture capital firm and an industry "icon" in the life sciences arena. The company's over 50 person scientific and business team, supported its nearly 40-person Advisory Boards, the strategic and financial network of its limited partners, and the close relationships developed with numerous life science companies and managements, provide Burrill with unparalleled access and insight.

Venture Capital
The Burrill family of venture capital funds, with over $500 million under management, includes the Burrill Life Sciences Capital Fund, the Burrill Biotechnology Capital Fund, the Burrill Agbio Capital Fund and its successor-the Burrill Agbio Capital Fund II, and the Burrill Nutraceuticals Capital Fund. The Burrill Life Sciences Capital Fund III, a $300-$500 million fund expects to become operational in 2005.

Merchant Banking
Burrill & Company assists life science companies to identify, negotiate and close strategic partnerships and merger and acquisition transactions providing access to resources, technologies or collaborations essential for executing company business plans. Twenty strategic partnerships and/or mergers with a value in excess of $1 billion have been completed to date.

Life Science Media
Burrill & Company's Life Science Media Group focuses on the organization and hosting of life sciences conferences worldwide and the publication of a wide range of industry reports and newsletters. The flagship is Burrill's annual book on the "State of the Industry", which has been an important part of the biotech industry's view of itself over the last 19 years. Biotech 2005-Life Sciences: A Move Towards Predictability is the latest in the nearly 20-year series. This 625-page book offers a perspective on where the industry has been and where it is headed. The Media Group's monthly and quarterly reports and publications and its Datacenter provide a totally up-to-date resource for the latest insight, intelligence and information regarding the biotech industry. To order Biotech 2005 or to subscribe to the Burrill Datacenter, visit www.burrilldatacenter.com or call 415-591-5400.