Biotech's Performance is Flat in November

…but the overall news for the industry is good

San Francisco, CA - December 01, 2003

Biotech's performance on Wall Street was relatively flat in November with the Burrill Biotech Select Index up not quite 1%, trailing the NASDAQ, up 1% and slightly bettering the DJIA, down less than 1% for the month. "The equity markets, relatively strong during the first three quarters of the year, have been choppy these last couple of months, but the overall health of the biotech industry looks good…despite a not-so-stellar performance by some of the industry's newest IPO entrants," said G. Steven Burrill, CEO of Burrill & Company, a San Francisco-based life sciences merchant bank.

"Indeed, the U.S. economy appears to be coming around and corporate profits are on the rise. Yet the current IPO window is fragile. We saw two biotech companies go public in November—NitroMed (NTMD) and Pharmion (PHRM), but of the eight biotech firms to enter the market, only two—Neurochem (NRMX) and Genitope (GTOP) are above water," noted Burrill. "All the rest of them are trading at discounts and many investors have found follow-on financing to be a more attractive vehicle than the new public offerings," he said. Year to date, the industry has raised a total of about $500 million through IPOs, compared to $3.1 billion raised through secondaries.

"Even though two biotech firms pulled out of the lineup this month, one was added—Tercica delayed its IPO indefinitely and TolerRx postponed its offering as a result of 'newly available data' from a preclinical drug trial-this is not the end of the biotech IPO market…but we can expect the selectivity to continue," Burrill observed. In fact, another IPO registration—Anadys Pharma—was filed on November 17, 2003, bringing the total number of deals on file to eleven.

November was also a pretty good month for drug approvals with the FDA giving the green light to Cialis, the Lilly (LLY)/Icos (ICOS) pill for the treatment of erectile dysfunction; and the prostate cancer drug, Plenaxis, from Praecis (PRCS). "On another positive note, a report released by Standard and Poor's on November 25 predicts that biotech industry sales are set to grow more than 20% in 2004, based on the products in the pipeline. And we aren't even close to experiencing the full impact of all of this powerful science," Burrill said.

"But the single most important event which took place in November was the Congressional passage of the Medicare Prescription Drug and Modernization Act of 2003 which will give older Americans a much-needed prescription drug benefit and provide federal reimbursement of biotechnology products and other drugs," he said. "The legislation will also prohibit the future application of the controversial 'functionally equivalent' mechanism for novel drug reimbursement and it will mitigate the cuts that were made to the use of biotech products in outpatient settings earlier this year," Burrill added. "While the legislation has plenty of critics, we believe the new Medicare bill will encourage biotechnology's innovation by ensuring that many of its medications will be covered by Medicare," he said.

"In all, November was a positive month for the industry. However this is the season for profit taking…and this has been a pretty good year for biotech investors," explained Burrill. All of the Burrill Indices have experienced high double digit gains for the year to date. For example, the Burrill Biotech Select Index has seen its value increase by 59% since the start of the year. The Burrill Large Cap Biotech Index and the Burrill Small Cap Biotech Index have seen gains of 60% and 65%, respectively and the Burrill Nutraceuticals Index has seen a huge increase of 104% year to date.

Indeed, the Burrill Nutraceuticals Index had the largest gain of any of the indices, both this month and this year, rising 10% in November and a whopping 104% year to date. Shares of Cyanotech Corporation (CYAN) soared 116% after the company announced positive results for the second quarter of fiscal year 2004 with net sales increased 41% from Q2 03. The company also received GRAS (generally regarded as safe) status from the FDA for Spirulina, a dried form of microalgae and is noted for its fatty acids, vitamins, beta-carotene, Zeaxanthin, phycocyanin and vegetable protein. Hansen Natural's (HANS) shares jumped 33% when the company reported record sales and earnings for Q3 03. Net income for the third quarter increased 65% to $2.1 million, up from $1.3 million in the third quarter of 2002. Martek Biosciences (MATK) saw its shares rise 25% with continued validation of the health benefits of DHA omega-3 fatty acids. Martek also got a boost from the announcement in mid-November that Nestle USA had introduced its new infant formula containing Martek's DHA and ARA.

The Burrill Diagnostic Index was up 5% for the month and up 33% year to date. Shares of Cepheid (CPHD) soared 47% for several reasons including the restructuring of its agreements with Infectio Diagnostics for non-exclusive worldwide distribution rights to certain IDI assays that have been configured for use with Cepheid's Smart Cycler® system. Cepheid also was named "Defense Business Leader" on the "Scientific American 50" and awarded "2003 Best of Small Tech Product" for GeneXpert® System by Small Times Magazine. Third Wave Technology's (TWTI) shares rose 21% with the announcement that Mayo Medical Laboratories, the international reference laboratory of the Mayo Clinic, had selected the company's Invader® technology as its genetic testing platform for key blood-clotting and cardiovascular disease risk factors. Shares of Sequenom (SQNM) also rose 14% with the announcement of Q3 03 results that showed a decreased net loss to $8.8 million from $17 million in third quarter 2002.

The Burrill Genomics Index lost ground in November after a good October, dropping less than 1%, but up 38% since the beginning of the year. Caliper Technologies' (CALP) shares rose 14% during the month after announcing an amicable settlement of the patent infringement suit filed against Molecular Devices Corporation. But shares of Human Genome Sciences (HGSI) fell 8% in the month and Lynx Therapeutics' (LYNX) shares were down 7%. "I think the intrinsic value of genomics has galloped ahead of its perceived value on Wall Street," said Burrill. "We are still early in seeing how all this technology translates into dramatically more efficient discovery and more personalized medicine."

The Burrill Select Index rose 1% in November, up 59% year to date. The index was held down by the 32% drop in the share price of Vertex Pharmaceuticals (VRTX) after the biotech firm said it has halted testing of an experimental rheumatoid arthritis treatment, pralnacasan. The company also announced a wider than expected third quarter loss. Shares of Geron (GERN) also took a tumble and ended the month down 6%. Although the company raised $60 million in its follow-on, it took a 26% cut to do so. Shares of Onyx Pharmaceuticals (ONXX) shot up 17% following the announcement of new preclinical data on BAY 43-9006, an anti-cancer drug being co-developed by Onyx and Bayer. The data suggest that the compound may have a potential role in the treatment of a range of cancers.

The Burrill Large-Cap Index rose less than 1% in November, but is up 60% for the year. Shares of Gilead Sciences (GILD) rose 8%. On November 25, the company announced favorable preliminary results from a Phase III clinical trial comparing the efficacy and safety of its compound, emtricitabine, in patients with chronic hepatitis B. Invitrogen (IVGN) also saw shares rise 7% in November. The company acquired a privately-owned RNAi technology company, Sequitur, to further its own efforts in this area. Finally, Genentech's (DNA) shares grew by 3% in November, amidst mixed news regarding the company's new cancer drug, Avastin. Although Avastin did not significantly improve survival rates in metastatic colorectal cancer when used in conjunction with a two-drug cocktail, the study showed that cancer patients taking the therapy experienced a 67% longer progression-free survival.

The Burrill Mid-Cap Index also rose by 4%, up 38% for the year. Shares of ZymoGenetics (ZGEN) advanced 9% after the completion of a follow-on offering which netted the company $71 million. The company also reported third quarter results which showed an increase of revenue from $5.9 million in the third quarter of 2002 to $8.2 million in 2003. Shares of Kos Pharmaceuticals (KOSP) rose 11% during month after the company announced a three year deal with Takeda Chemicals' U.S. pharmaceutical unit to co-promote Kos' cholesterol drugs Niaspan and Advicor—a move expected to boost 2004 earnings by 10% to 15%. Cerus Corporation's (CERS) shares declined 24% during November, continuing a steady slide after a mid October announcement of a dispute with Baxter Credit Corporation over the timing of a $54 million loan repayment. The company reported third quarter results which showed a narrowing net loss due mostly to increased funding from government grants. Shares of Exelixis, Inc. (EXEL) dropped 10% following the report of a net loss of $25 million as compared to a net loss of $22.9 million in third quarter 2002. On November 24, Exelixis' subsidiary in Europe, Artemis Pharmaceuticals, signed a cooperation agreement for Artemis to use its patented platform to generate genetically engineered mice for Bayer to use in its human drug discovery research activities.

The Burrill Small-Cap Index also rose 4% during the month, up 65% year to date. Shares of Applied Molecular Evolution (AMEV) shot up 43% on the announcement of a merger with Eli Lilly for $18 per share, far above its $11 market price. "Although Applied Molecular has very little revenue, their proprietary technology to develop improved versions of novel and currently approved biopharmaceuticals will be very valuable to Lilly", commented Burrill. Maxim Pharmaceuticals' (MAXM) stock rose 19% on news that it had filed an application for European approval to market its histamine based anti-cancer drug, Ceplene, for the treatment of malignant melanoma. Dyax Corporation's (DYAX) shares rose 22% on completion of the sale of its Biotage separations unit to Pyrosequencing AB of Sweden. Shares of Rigel Pharmaceuticals (RIGL) also rose 22% with the announcement that it had entered into a nonexclusive licensing agreement with Chiron Corporation (CHIR) to discover, develop, and commercialize small molecule therapeutics against hepatitis C virus drug targets. Share price of Molecular Devices (MDCC) rose 12% on news that the company had settled the patent infringement lawsuit filed against it by Caliper Technologies. More than half of the companies in the index lost ground in November. Palatin Technology (PTN) shares sank 29% despite presenting positive safety and efficacy data from its Phase IIb ''at home" study of PT-141 for male sexual dysfunction.

The Burrill Agbio Index rose 4% during November, up 18% for the year. Terra Nitrogen Company's (TNH) shares were up 10% in response a strong seasonal demand. Shares of Syngenta (SYT) rose 13%, due in large measure to its announcement of the introduction of two new herbicide products—Touchdown TotalTM and Touchdown HitechTM—novel formulations for herbicide-tolerant systems. Delta Pine & Land (DLP) saw its shares rise 10% after announcing financial results for the year ended August 31, 2003. Despite weather related difficulties, the company reported a revenue increase to $281 million from $258 million in the previous year. Monsanto's (MON) shares managed to gain 9% in November after the company announced that cash flow for 2003 would be at the upper end of its estimated range of $50 to $100 million. The company said it earned $1.37 a share in fiscal 2003, which ended August 31, and expected to earn between $1.40 and $1.50 a share in 2004.

A review of the Burrill Life Sciences Indices for November 2003 follows:

Index	12/31/02 Value	10/31/03 Value	11/28/03 Value	Percent Change For Month	Percent Change For Year
Burrill Biotech Select Index	159.52	251.82	253.57	0.69%	58.96%
Burrill LARGE-CAP Biotech Index	198.68	316.43	316.94	0.16%	59.52%
Burrill MID-CAP Biotech Index	121.39	162.27	167.99	3.52%	38.39%
Burrill SMALL-CAP Biotech Index	84.58	134.74	139.85	3.79%	65.35%
Burrill Agbio Index	68.57	77.44	80.79	4.33%	17.82%
Burrill Genomics Index	84.54	117.73	116.93	-0.68%	38.31%
Burrill Biomaterials/ Bioprocess Index	80.12	95.31	98.89	3.76%	23.42%
Burrill Diagnostic Index	65.31	82.73	86.70	4.80%	32.75%
Burrill Nutraceuticals Index	135.13	250.08	275.30	10.09%	103.73%
Burrill Life Science Composite Index	115.31	162.07	175.91	8.54%	52.55%

Index	12/31/02 Value	10/31/03 Value	11/28/03 Value	Percent Change For Month	Percent Change For Year
Burrill Biotech Select Index	159.52	251.82	253.57	0.69%	58.96%
NASDAQ	1335.51	1932.21	1960.26	1.45%	46.78%
DJIA	8341.63	9801.12	9782.46	-0.19%	17.27%
Russell 2000	383.09	528.22	547.38	3.63%	42.89%

Burrill & Company
Burrill & Company is a life sciences merchant bank, focused exclusively on companies involved in biotechnology, pharmaceuticals, diagnostics, human healthcare and related medical technologies, wellness and nutraceuticals, agricultural technologies, and industrial biotechnology (biomaterials/bioprocesses).

Venture Capital
The Burrill family of venture capital funds, with over $485 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.

Strategic Partnering
Burrill & Company assists life science companies in identifying, negotiating and closing strategic partnerships between large and small companies providing access to resources, technologies or collaborations essential for executing their business plans.

Burrill & Company also works with major life science companies to spinout internal assets and capitalize on their value, ranging from the outright sale of products or businesses to creation of new companies to exploit these assets. Burrill uses its extensive network to help companies identify, assess and capture ("spin-in") products and companies strategic to building their businesses.

Burrill & Company's BioStreet™ is an internet-based life sciences transaction service which enhances dealmaking capabilities by offering a broad range of services designed to streamline and facilitate deals. BioStreet combines the efficient distribution power of the worldwide web with the scientific skills and strategic relationships necessary for concluding successful transactions.

We have completed more than 25 strategic partnerships with a value in excess of $1.5 billion.

For more information, please visit Burrill & Company's website at www.burrillandco.com

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