Biotech's Performance Takes a Turn for the Better in April

The Burrill Large Cap Index soars 11%, up 15% year to date!

San Francisco, CA - May 01, 2003

"After months of fear, skepticism, and risk aversion, investors are regaining an appetite for biotech stocks," remarked G. Steven Burrill, CEO of Burrill & Company, a San Francisco-based life sciences merchant bank. "Removing the uncertainty around the war in Iraq has dramatically helped to reverse general market concerns, and biotech's own performance has improved," noted Burrill. The Burrill Biotech Select Index gained 8% in April, outperforming the DJIA, up 6% and in line with the NASDAQ, up 9% for the month.

News on the product front was generally good with the FDA bestowing its blessing on Genzyme's (GENZ) Fabrazyme and Johnson & Johnson's much anticipated drug-coated stent for the million or so Americans who undergo angioplasty procedures. There also was promising news coming out of clinical trials including the news that Entremed's (ENMD) lead cancer drug was shown to be more potent than comparable treatments. That news alone caused shares of the small biotech to pop 85%. "Investors are glued to the outcome of these clinical trials," noted Burrill. "There are dozens of biotech drugs lining up on the FDA's runway and a flurry of approvals would bolster the industry's perceived value on Wall Street," he said.

There also was good news on the earnings front. A number of biotech companies reported strong first quarter earnings including Idec Pharmaceuticals (IDEC) which reported a 39% increase in profits due to higher sales of its cancer drug, Rituxan. Despite the positive news, shares of Idec fell 4% for the month. Genzyme, which saw its first-quarter profit double and its net income rise to $61.9 million from $30.7 million a year earlier, saw its share price climb by 10%. Chiron (CHIR) and MedImmune (MEDI) both swung from losses a year earlier to first-quarter profits in April with shares rising by 9% and 8%, respectively and Protein Design Labs (PDLI) reported that revenues in 1Q 03 increased by 59%. Shares of PDLI rose 33%. "But there were disappointments too," noted Burrill. "Affymetrix (AFFX) warned that its revenues would come in short of its previous expectations and its stock fell 35% on the news. By the end of the month, shares of Affymetrix were trading at $18.48, down 29%," he said.

April was a particularly good month for biotech's more established firms. The Burrill Large-Cap Biotech Index rose nearly 11% in April, up more than 15% year to date. Reversing the downward trend that plagued companies throughout 2002 were Millennium (MLNM), up 40% and Human Genome Sciences (HGSI), up 36%. HGSI was granted "fast track" status for its experimental drug to treat Lupus-LymphoStat-B. Biogen (BGEN) also saw an increase in share value in April of 27%, based in part on its earnings forecast for 2003 which calls for stronger than expected sales of Avonex, its drug for multiple sclerosis.

Genzyme received FDA approval to market the first and only treatment-Fabrazyme-for the genetic disorder, Fabry disease. While much anticipated, the announcement nonetheless helped to push Genzyme's stock up by 10%. Shares of ICOS also popped in April, up 43% for the month. "The new ED drug from ICOS and Eli Lilly, Cialis, is getting good reviews. According to the latest data, Cialis works for more than 36 hours, compared to five hours for Viagra," noted Burrill.

Amgen (AMGN), which has projected 2003 sales of $7+ billion with an estimated 20% earnings growth, saw share values increase in April by 7%. "Amgen has a potential blockbuster with Enbrel, the rheumatoid arthritis drug it acquired when it bought Immunex last year. Enbrel is now being considered for the treatment of psoriasis and even without the new indication, the company is projecting sales of Enbrel will bring in nearly $1.4 billion in 2003," added Burrill.

"The swift victory in Iraq has bolstered investor confidence and the prospective infusion of $6 billion through Project BioShield has also helped to restore enthusiasm for the sector," noted Burrill. "The other big news in April has been on the outbreak of Severe Acute Respiratory Syndrome (SARS) and its myriad implications. At a time when many of us were poised for bad news of bioterrorism, nature threw in a curve ball of her own," he explained.

"Reminiscent of the October 2001 anthrax incident, the government issued a plea for help from the industry to tackle the illness," said Burrill. Scientists from the US Centers for Disease Control, the National Institutes of Health, and the Department of Defense, as well as Tommy Thompson, met in early April with representatives from about a dozen companies including Merck, Wyeth, Chiron, Vical, Avant, Johnson & Johnson, Baxter International, GlaxoSmithKline, Aventis, PowderJect, and Berna Biotech. "Although scientists have mapped the genome of the coronavirus responsible for SARS and governments have already tested more than a thousand compounds against the virus, no magic bullet has been found," noted Burrill. "Farther still from our reach is a vaccine against the disease, yet investor interest has definitely been kindled by the prospect," he said. "Take AVI BioPharma (AVII) for example. The company announced this month that it would be providing its experimental NEUGENE® antisense drug to NIH's National Institute of Allergy and Infectious Disease (NIAID) for SARS treatment testing. Shares of AVII rose 82% for the month," he added.

"Other winners in the SARS race to date were GenVec (GNVC) and Medarex (MEDX)," noted Burrill. "On the strength of their preliminary involvement in the fight against SARS shares of GenVec rose 90% in April and Medarex's stock gained 29%," he said. "Just as we saw with the companies first associated with bioterrorism countermeasures, these first-comers are getting a lot of investment attention…but the popularity isn't likely to last as real products and real profits are years away," he said.

The Burrill Mid-Cap Biotech Index was up 11% in April. In addition to Protein Design Lab's 33% jump in stock value, Ligand (LGND) also turned in a strong performance, up 37% based in large measure on the company's 38% increase in net product sales. The other big mover in the segment was Adolor (ADLR), up 42%. The company reported that its drug Alvimopan for restoring gastrointestinal function was well tolerated in a Phase III clinical trial.

The Burrill Small-Cap Biotech Index also was up by nearly 13% for the month with two companies leading a pack of gainers. Pain Therapeutics (PTIE) saw its stock value jump 88% in April. The company announced that it was ahead of schedule in its pilot clinical study for PTI-901 for patients with irritable bowel syndrome (IBS). "The company holds exclusive worldwide commercial rights to a bunch of patents associated with the long-term treatment of IBS patients with proprietary opioid antagonists. About 10% of the US population suffers from the condition, so the potential here is considerable," stated Burrill.

Shares of CURIS (CRIS) also shot up in April gaining 163%. Early in the month the an online issue of The Proceedings of the National Academy of Sciences reported that CURIS scientists had identified a novel small molecule drug candidate, CUR-61414, that prevents the proliferation and selectively induces the death of the tumor cells in two different models of basel cell carcinoma-a skin cancer that shows up in one million new Americans each year. The company has developed several classes of Hedgehog (Hh) protein inhibitors. It is thought that the unregulated activation of the Hh signaling pathway directly results in the cancer's development. While the findings are preliminary, the company is planning to use Hh inhibition as a novel targeted means of treating other forms of cancer in addition to BCC.

The Burrill Genomics Index rallied slightly in April gaining nearly 5% and up nearly 3% year to date. Besides the strong double digit increases generated by Millennium (up 40%) and Human Genome Sciences (up 36%), Lynx (LYNX) and Gene Logic (GLGC) posted gains of 62% and 30% in increased share value, respectively. "After a protracted period of market correction, the genomics sector is finally showing signs of life," said Burrill. "Compounds are advancing through clinical trials, deals are getting done, and the technology is proving itself to be increasingly useful. In the aftermath of all this restructuring, a lot of companies have strengthened management, sharpened their focus, and streamlined their operations…all of this is beginning to pay off," he noted.

The Burrill Diagnostics Index was up 11% in April and up 13% year to date. All but two companies within the index posted gains. The exceptions were Cepheid (CPHD), down 10% for the month and Exact Sciences (EXAS), down 7%. The leading performers within the index were Quidel (QDEL) which saw a gain of 53% and the much beleaguered Orchid (ORCH) which gained 54%. Quidel's QuickVue® influenza test which can distinguish the flu from other respiratory illnesses gained notoriety during the month as the SARS crisis intensified. The test is expected to help reduce the nearly 36,000 flu related deaths by helping doctors detect the illness before complications arise. "Orchid managed to remain listed on NASDAQ and obtained shareholder approval for a reverse stock split-strong moves that investors approved of," said Burrill.

The Burrill Agbio Index jumped 11% in April. Every company within the index gained ground during the month and shares of Large Scale Biology (LSBC) soared, increasing 95% in value. Shares of Paradigm (PDGM) were up 26% for the month. In addition to posting improved financial results for 1Q 03, Large Scale Biology initiated field production of recombinant aprotinin, a protease inhibitor used to minimize bleeding and decrease inflammation during cardiopulmonary bypass surgery-a market estimated to be about $300 million. Paradigm just announced an $8.4 million addition to its contract with the National Institute of Environmental Health Sciences (NIEHS) for toxicogenomics studies. "No longer constrained by their agbio beginnings, these companies are moving swiftly into drug development, toxicogenomics (PDGM) and transgenic production (LSBC)…and gaining value as they progress," noted Burrill.

The Burrill Nutraceuticals Index rose 10% in April, up 11% year to date. USANA Health Sciences (USNA) saw it stock jump 36% in April after reporting a year-over-year increase of nearly 43% in sales. Another strong performer, Martek Biosciences' stock gained 19% in value with investors liking Standard and Poor's initiated coverage on Aprill 14 with a five Stars investment rating. Martek's nutritional oil compound which is used to enhance infant formula has been licensed to manufacturers covering 85 to 90% of the US and 60% of the global market for infant formula.

A review of the Burrill Life Sciences Indices for April 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.

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The Burrill family of venture capital funds, with over $417 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.

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