Investor Enthusiasm Returns to Biotech in May

Biotech turns in its finest performance in years!

San Francisco, CA - June 02, 2003

"Great news on every front-product approvals, clinical triumphs, and company turnarounds-ignited investor enthusiasm for biotech in a big way during May," remarked G. Steven Burrill, CEO of Burrill & Company, a San Francisco-based life sciences merchant bank. "We haven't seen this much positive movement since the genomics 'bubble' in 2000," he said. "But there is a significant difference-this recovery is based on far more than hope and hype…it's based on real products, real revenue streams, and real market sustainability," noted Burrill. The Burrill Biotech Select Index gained 21% in May, dramatically outperforming NASDAQ, up 9% and the DJIA, up 4% for the month.

"May was one of the best in the industry's history for positive movement on the product front," said Burrill. On May 5, the Food and Drug Administration (FDA) gave its blessing to AstraZeneca's (AZN) novel EGFR inhibitor cancer drug, Iressa, as a last ditch therapy for patients with non-small cell lung cancer (NSCLC). The drug was approved in Japan last July and in Australia on May 1, 2003. "The first in a growing list of EGFR inhibitor compounds to pass muster with the FDA, Iressa's approval gives credence not only a new class of drugs, but a new attitude at the FDA," explained Burrill. "Even though the clinical trial data showed that only 10% of the patients' tumors responded to the therapy, the agency saw merit in providing a drug that worked remarkably well in a small subset of patients," he noted. Shares of AstraZeneca's stock closed the month higher than they've been in nine months.

The FDA also approved Millennium's (MLNM) Velcade for multiple myeloma, a bone marrow cancer that affects approximately 40,000 Americans. "Millennium's stock, which had slipped dramatically over the last two years from a high of nearly $68 per share in December 2000 to a low of less than $7 per share in February of this year, rebounded 41% in May," said Burrill. "It's not that revenues from Velcade are expected to be dramatic initially-peak sales for a multiple meyloma therapy are only in the range of about $250 million a year," he noted. "But there are more than 40 additional clinical trials of Velcade now underway for a host of cancers including kidney and colon. The first in a new class of cancer drugs called proteasome inhibitors, Velcade, like Iressa, offers proof of concept," added Burrill.

Millennium was not the only large cap biotech to enjoy a bit of product success. Indeed, Genentech (DNA) had good news on two products. On May 15, an FDA panel unanimously backed the company's asthma drug, Xolair. The company then reported on May 19 that its anti-angiogenesis therapy, Avastin, had met the primary endpoint of improving overall survival as well as secondary endpoints of progression-free survival response rate, and duration or response in a 900-patient Phase III trial in colorectal cancer patients. The news comes after a string of failures in this class of drugs including a disappointing Phase III clinical trial pitting Avastin against breast cancer last year.

"Avastin's clinical success has given investors confidence that anti-angiogenesis can work," noted Burrill. "Investors liked the story so much that Genentech's stock soared 65% in May and gained more than $12 billion in market cap in a week-partially on news about a drug which is expected to bring in about $1.5 to $2 billion in peak sales, once it's approved. But the fact that this class of drugs is working as it should is terrifically important to this industry," he said.

"All the endorsement received for these first in class therapies had a positive reverberating effect throughout the genomics sector," added Burrill. The Burrill Genomics Index jumped 30% in May, up 34% for the year. "We're finally seeing genomics plays recovering some of the enormous amount of value that they have lost over the last couple of years. We saw a huge pop in investor passion for these newer technologies and that was reflected not only in the index but also with all except one company posting strong double-digit gains," he noted. "Incyte (INCY) was up 46% in May and Nanogen (NGEN) was up 141%--that's in addition to the strong performances of Human Genome Sciences (HGSI), up 26% and Millennium, up 41%," noted Burrill.

The Burrill Large-Cap Biotech Index gained 20% for the month, up 38% year to date. In addition to the successes enjoyed by Genentech and Millennium, every other company in the index saw the value of its stock rise. Shares of Affymetrix (AFFX) jumped 23% and shares of ICOS (ICOS) were up 18%. On May 29, an FDA Advisory found that erectile dysfunction drug, Levitra from Bayer (BAY) and GlaxoSmithKline (GSK) wasn't associated with a serious cardiac side effect. Investors perceived the news to be positive as well for Cialis, the anti-impotence drug from ICOS and Eli Lilly (LLY) which is looking good for approval in the second half of the year. Genzyme (GENZ) also got the green light from the FDA for Aldurazyme which it co-developed with BioMarin (BMRN) to combat a rare inherited disorder called MPS-1 that progressively damages organs and often kills patients before they reach adulthood. Shares of Genzyme were up 18% for the month.

The Burrill Mid-Cap Biotech Index rose 22% in May, up 21% for the year. Leading the pack was Elan (ELN), up a whopping 82% after a supportive report on its experimental Alzheimer vaccine was published in the journal, Neuron, and the company was able to resolve its dispute with King Pharmaceuticals (KG). Also performing well in May were shares of Protein Design Labs Inc. (PDLI), up 43% on news that the company's therapy for inflammatory bowel disease showed encouraging results in patients with severe ulcerative colitis refractory. Perhaps the biggest surprise was ImClone which saw its shares rise by 56% in anticipation of positive data on its cancer drug Erbitux, scheduled to be presented at the American Society of Clinical Oncology-the same meeting that the company chose to introduce its first trial results two years ago. Meanwhile, former president and CEO, Sam Waksal, is slated to face sentencing on charges of insider trading on June 10.

The Burrill Small-Cap Biotech Index also increased in value by 20% this month, up 17% year to date. Shares of Pain Therapeutics (PTIE) took off following the news that the company's PTI-901 irritable bowel syndrome drug met the primary and secondary endpoints of a recent pilot clinical study. 76.2% of patients in the 50-person, four-week trial reported fewer days with pain and patients reported better daily results. By month-end the company's stock had risen 132%, closing at $7.47 per share. Aradigm Corporation (ARDM) also saw its shares pop 73% in May after the company announced that it was acquiring selected assets of Weston Medical including a needle-free alternative delivery method for biotherapeutics. Shares of DOV Pharmaceutical (DOVP), one of the few biotechs to go public in 2002, were up 51% in May due in part of the company's shrinking financial losses.

The Burrill Diagnostics Index, while up only 9% for the month is up 23% year to date. Orchid Biosciences (ORCH), with shares up 135%, announced on May 7 that the American Association of Blood Banks approved its paternity test. "This approval has been good for Orchid and its new line of tests," noted Burrill. "The technique involved takes advantage of the company's SNP genotyping capabilities which can detect genetic diversity."

The Burrill Agbio Index was the only index to post a loss in May, shaving just a shade of a percentage point off its value. "Although most of the companies in the index turned in a relatively lackluster performance, two companies had good stories to tell and the performance of their stock reflected that," stated Burrill. Paradigm (PDGM), ending the month up 52% to close at $1.25 per share, as investor enthusiasm supported its conversion from functional genomics to toxicogenomics-a shift in the company's focus to embrace drug discovery," he noted. "Large Scale Biology (LSBC), also up 59% for the month, has been evolving its biomanufacturing capabilities. The company announced that it will evaluate field production for its proprietary plant-produced human alpha-Galactosidase A as a potential treatment for Fabry disease-a market that could exceed $1 billion," said Burrill.

"The healthcare investor is returning to the sector and there is upside momentum," declared Burrill. "Biotech is outperforming other segments of the publicly traded market and with hundreds of additional biotech compounds lining up for approval-and with what appears to be a streamlined and more pragmatic FDA, this is just the beginning of the recovery from several down years," he said.

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

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 biomaterials/bioprocesses.

Venture Capital
The Burrill family of venture capital funds, with over $450 million under management, includes the Burrill Life Sciences Capital Fund, the Burrill Biotechnology Capital Fund, the Burrill Diagnostics Fund, the Burrill Agbio Capital Fund and its successor-the Burrill Agbio Capital Fund II, the Burrill Nutraceuticals Capital Fund, and the Burrill Biomaterials/Bioprocess Capital Fund.

Strategic Partnering
Burrill & Company assists life science companies to identify, negotiate and close strategic partnerships providing access to resources, technologies or collaborations essential for executing their business plans.

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