All biotech indexes rise in November with supply pipeline strong, Merrill report says

By E. Janene Geiss

Philadelphia, Dec. 5 - All Merrill Lynch Biotech indexes were up in November as money flows were positive and pipeline supply is at notably high levels, according to a report from Merrill Lynch analyst Eric Ende.

During November, the Merrill Lynch Small-Cap Biotech Index increased 1%, the Mid-Cap Biotech Index increased 6.5% and the Large-Cap index was up 5.7%, according to the report.

For the same month, the Merrill Lynch Therapeutic Index increased 5.3% and the Genomics/Tools index was up 3.9%.

Merrill Lynch said the current four-week moving average funds flow was negative $322,000, which includes negative $15 million for the week ended Nov. 30, versus October's moving average of $23 million, the report said. Flows into health care/biotech funds were $1.6 billion year-to-date versus $1 billion for 2004, the report added.

Merrill said $290 million of new supply, $20 million due to convertibles, came into the market as compared to $819 million of new supply in October with $48.1 million due to convertibles.

Total supply in the pipeline was $8.6 billion versus October's pipeline supply of $8.7 billion. Currently, there are seven initial public offerings filed representing $667 million of new supply, the report said. The balance represents shelf filings and follow-on offerings.

Through February, three biotech company's shares will be released from IPO lock-up, the report said.

Of the biotech companies Merrill tracks, Cepheid Inc. recorded the best return of 73.3% for November while SFBC International Inc. had the worst return of negative 50.5%, the report said.

For the year, ViroPharma Inc. posted the highest return of 437.5% while CancerVax Corp. had the poorest return at negative 87.2, the report said.

Merrill said Amgen Inc. had the highest short interest at 24 million shares and Critical Therapeutics Inc. had the highest year-to-date percentage change. Introgen Therapeutics Inc. had the most days-to-cover.

The report said 61% of biotech companies had less than two years of cash and 36% had less than one year of cash, suggesting that additional financings are likely.

With 17% of biotech companies trading at less than two-times cash and 5% trading at less than one-time cash, the numbers are toward the low-end of historical norms, the report said.

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