By Angela McDaniels
Seattle, Aug. 1 - The Burrill Biotech Select Index fell by just 0.8% during July, despite president George Bush's veto that nixed a bill seeking to expand federal funding of embryonic stem cell research. This compares to a flat Dow Jones Industrial Average and the Nasdaq, which was down about 4%.
"Although the biotech industry's market capitalization, at $454 billion, is down 10% since the beginning of the year, there are encouraging signs that the bottom of the trough has been reached," G. Steven Burrill, chief executive officer of Burrill & Co., said in a company news release.
"The tension in the Middle East will still weigh on the markets, but overall the biotech industry's fundamentals are sound, as witnessed by some excellent second-quarter financial results from its blue chip companies. This will have a positive ripple effect and expect biotech to rebound by the end of August."
With stem cells becoming increasingly mired in political debate, there was some positive news out of California, where gov. Arnold Schwarzenegger, in the wake of the president's veto, provided a loan of up to $150 million to help the California Institute for Regenerative Medicine fund initial research grants, according to the release.
Five join IPO runway
Stem cell company Osiris Therapeutics Inc. added itself to the initial public offering runway, looking to sell 3.5 million shares in the range of $11.00 to $13.00.
Joining Osiris were Affymax Inc., Asthmatx Inc., Metabolix Inc. and Cadence Pharmaceuticals Inc. Removing themselves from the IPO runway in July were QuatRx Pharmaceuticals Co. and Caprion Pharmaceuticals Inc.
According to the release, 11 biotech companies have launched IPOs this year with an almost equal number filing proposals.
"Despite the fact that majority of the companies who successfully completed their IPOs this year are currently underwater, the desire from biotechs to test the market continues," Burrill said in the release.
"The market conditions, however, remain tough for biotech offerings, especially when potential investors see that biotech stocks that have debuted this year are off an average 13%."
One IPO did get out in July. Cleveland BioLabs Inc. completed its offering of 1.7 million shares at $6.00 per share and plans to use the net proceeds of about $8.5 million to continue the development of its radioprotectant and anticancer drug compounds.
In Europe, ThromboGenics completed its IPO on the Eurolist by Euronext Brussels, raising €38.5 million.
Funding on the rise
In July, an amendment to the provisions of the Small Business Innovation Research grants passed that restores the original interpretation of eligibility by allowing more biotech and medical device companies to again compete for funding, according to the release.
"This is extremely welcome news as venture-backed companies use the grants to obtain proof-of-principle for their innovative technologies and products," Burrill said in the news release.
"Small Business Innovation Research grants have been the life-blood for emerging biotech companies for two decades, but a 2003 change in eligibility meant that many of these small biotech companies who were 51% owned by a group of venture capital firms no longer qualified for [the grants]."
Blue chips' numbers positive
A slow month gave investors a chance to focus on the financial performance of the industry's blue-chip companies, which were reporting their second-quarter results. The release said that, overall, the numbers were extremely positive.
Amgen Inc.'s share price, for example, vaulted 7% in the month thanks to very strong second-quarter financials that revealed earnings of $1.05 per share, a 19% year-over-year increase, on revenue of $3.60 billion, up from $3.17 billion last year.
Genentech Inc. didn't get the same reaction for its 80% jump in second-quarter earnings, finishing the month down 1%. The changes in share value brought the two companies closer together in market cap, with Genentech still the leader at $85.1 billion and Amgen at $81.5 billion, the release said.
Biotech Select flat
The Burrill Biotech Select Index fell by 0.8% in July, and the index's year-to-date return fell to negative 18.75%.
Cephalon Inc. saw its share price jump 9% by the end of July, partly on the news that it was seeking another European acquisition.
Gilead Sciences Inc. was also up 4% after it revealed that it had agreed to exercise its option to purchase Corus Pharma for $365 million. In April, Gilead invested $25 million in Corus, becoming the second-largest shareholder in the company and gaining an exclusive option to purchase the remaining shares of the company. Corus has three drugs in the pipeline with one, an inhaled antibiotic for respiratory infections in cystic fibrosis, in phase 3 clinical testing.
Genentech entered into collaboration with Inotek Pharmaceuticals Corp. on inhibitors of poly (ADP-ribose) polymerase (PARP) for the potential treatment of cancer. PARP is a nuclear enzyme within cells that directs the repair of damaged DNA via the activation and recruitment of DNA repair enzymes and has applications for the treatment of oncology and cardiovascular conditions, according to the release. This news helped the company close July with its share value off by 1%.
Wider-than-expected losses drove Vertex Pharmaceuticals Inc.'s share down to close off 9% by the end of the months.
Genomics up
While the Burrill Genomics Index rose by 8% for the month, its year-to-date return remains solidly in the red at negative 27%. Shares of index companies such as Affymetrix and Gene Logic Inc. have dropped over half their value since the beginning of the year, according to the release.
Affymetrix's shares closed down 16%. The company said it was cutting prices on its 500K SNP (single nucleotide polymorphisms) system and plans to offer the two-chip system as a single array by the end of the year.
Gene Logic reported that poor sales of its genomics technologies and services will have an impact on its financial performance for some time to come. The company's shares closed down 12%.
Shares of Caliper Life Sciences Inc. suffered a drop of 15% in share value by the end of the month. The release attributed this mainly to a lowering of the company's 2006 revenue outlook after a Securities and Exchange Commission review delayed the company's acquisition of Xenogen Corp.
Mid-Caps down slightly
The Burrill Mid-cap Biotech Index fell by 1.8% in July, bringing its year-to-date return to negative 12.5%. The index remained on a relatively even keel thanks to the exceptional performance of Illumina Inc., whose shares have seen a meteoric rise of 171% since January, the release said.
In July, Illumina announced that it had formed a diagnostic collaboration with ReaMetrix Inc. to co-develop molecular diagnostic panels for a range of disease areas. ReaMetrix gained non-exclusive rights to market the resulting panels to India, and Illumina will retain rights to market the tests outside of India. Illumina's shares closed July up 29%.
New River Pharmaceuticals Inc., whose shares closed the month down 14%, and Albany Molecular Research Inc., which finished down 15%, signed a multiyear contract in which Albany will help develop an attention deficit hyperactivity disorder drug for New River. Financial terms of the deal were not disclosed.
Alnylam Pharmaceuticals Inc. and Inex Pharmaceuticals Corp. said that they are accelerating their collaboration focused on the systemic delivery of RNAi therapeutics. Alnylam and Inex formed this collaboration in March to explore use of Inex's liposomal delivery technology for the systemic delivery of Alnylam's RNAi therapeutic products. Alnylam's shares fell 15% by month end after the company reported a wider-than-expected net loss in the second quarter.
Small Cap Biotech tumbles
The Burrill Small Cap Biotech Index fell 15.2% in July, and its year-to-date return is negative 8.7%. July was not kind to the companies in the index, according to the release, with 75% losing ground.
The only positive ray of light was for Aradigm Corp., with its shares surging 31% after it negotiated a restructured deal with Novo Nordisk to develop inhaled insulin. Aradigm will receive a cash infusion of $27.5 million from Novo Nordisk.
Shares of Neose Technologies Inc. dropped 34% after the Food and Drug Administration raised questions about the stability testing of the company's experimental anemia treatment, further delaying the start of a study that has been held up for a year.
San Francisco-based Burrill & Co.'s principal activities are venture capital, merchant banking and media, with a focus on the life sciences.
IPOs during 2006
| Company | Ticker | Issue price | 7/31 price | % change | Amount raised | Market cap
|
| ($mln) | ($mln)
|
| Acordia Therapeutics | ACOR | $6 | $3.20 | -47% | $36 | $63
|
| Alexza Pharmaceuticals | ALXA | $8 | $7.32 | -9% | $44 | $173
|
| Altus Pharmaceuticals | ALTU | $15 | $14.28 | -5% | $121 | $317
|
| BioMimetic Therapeutics | BMTI | $8 | $7.48 | -6% | $36 | $116
|
| Iomai Corp. | IOMI | $7 | $3.31 | -53% | $35 | $56
|
| Omrix Bio-Pharmaceuticals | OMRI | $10 | $12.40 | 4% | $39 | $178
|
| Novacea | | NOVC | $6.50 | $8.30 | 28% | $45 | $192
|
| SGX Pharmaceuticals | SGXP | $6 | $4.87 | -19% | $25 | $73
|
| Targacept | TRGT | $9 | $6.68 | -26% | $45 | $127
|
| Valera Pharmaceuticals | VLRX | $9 | $7.55 | -16% | $35 | $113
|
| Vanda Pharmaceuticals | VNDA | $10 | $9.06 | -9% | $58 | $198
|
| Average | $8.60 | $7.68 | -13% | $49 | $146
|
|
|
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