By Angela McDaniels
Seattle, Nov. 1 - "Momentum for biotech companies and stocks continues to build ... in this final quarter of the year on a high note with one of its best monthly performances of 2006," G. Steven Burrill, chief executive officer of Burrill & Co., said in a company news release.
"Biotech is riding a wave of heightened investor enthusiasm driven by an increase in merger and acquisition activity, significant clinical data reported broadly and excellent third-quarter financial reports.
"Historically, the fourth quarter has always been a good one for biotech and so there is every reason to believe that it is on target to make up for the beating suffered during the first two quarters of 2006. The biotech industry's aggregate market cap at the end of October was just over $488 billion and by the end of the year, it could reach a new record high."
Fanning the flames of positive investor sentiment was the Dow Jones Industrial Average finally breaking through the psychological 12,000 barrier, the company said, closing the month up almost 3.5%.
The Burrill Biotech Select Index posted a gain of 6% this month, well ahead of the Nasdaq's 4.8% gain and the Dow.
After a brief lull, mergers and acquisition activity picked up in October. Eli Lilly & Co. said it was acquiring Icos Corp. for $2.1 billion - a move that gives the company full ownership of the erectile-dysfunction drug Cialis.
Merck & Co., Inc. enhanced its interest in RNA interference technologies with its $1.1 billion acquisition of Sirna Therapeutics, Inc. Shares of San Francisco-based Sirna doubled on Merck's announcement and closed October at $12.63, up 120% for the month.
IPOs a 'work in progress'
Burrill said the improved environment for biotechs opened the way for three initial public offerings getting done, although all had to modify their original filing price ranges.
Achillion Pharmaceuticals, Inc. priced its IPO of 4.5 million shares of common stock at $11.50 per share, down from its $14.00 to $16.00 filing range. Net proceeds from the offering are expected to be about $46.2 million, or $53.4 million if the underwriters exercise their over-allotment option in full. The infectious disease company's shares closed October at $14.00, up 21%.
Cadence Pharmaceuticals, Inc. priced 6 million shares at $9.00 each - also below its $11.00 to $13.00 filing range - in its IPO, and the company's shares closed October at $9.60, up 6%.
Trubion Pharmaceuticals, Inc. priced its offering of 4 million shares at $13.00 per share. The biopharmaceutical company is creating a pipeline of product candidates to treat autoimmune diseases and cancer. At the close of the month, its shares were valued at $14.00, up 7%.
On the other side of the ledger, BioVex Group Inc. and Asthmatx, Inc. withdrew their planned IPOs.
"Investors are obviously wondering whether the fourth quarter will be a robust one for the IPO market, still selectively looking at individual company portfolios and still skittish on the market's performance in October. While those that did get out benefited from the positive environment, valuation of offerings remains soft," Burrill said.
Biotech Select up
The Burrill Biotech Select Index rose by 6.48% in October, but the index's year-to-date return remains in the red at negative 8.3%.
The biggest gainer in the month was Geron Corp., whose shares closed up 28%. A developer of embryonic stem-cell therapies, the company's share price jump was mainly driven by the news that its quarterly earnings and revenue exceeded expectations, according to the release.
Record third-quarter sales for erectile dysfunction drug Cialis helped Icos post a 27% gain in its share price by the close of October business. The drug is manufactured and marketed by Lilly Icos LLC, a joint venture between Lilly and Icos. Also in the month, Eli Lilly announced that it would buy out its partner for $2.1 billion in an all-cash deal.
Burrill said Vertex Pharmaceuticals Inc. posted a strong October performance, with its shares increasing 22% by the end of October. The company released additional positive clinical data on its protease inhibitor, VX-950, now named Telaprevir, as a treatment for genotype 1 hepatitis C.
Amylin Pharmaceuticals Inc. and Invitrogen Corp. were the only two companies in the group to finish in negative territory. Amylin fell 1%, and Invitrogen's shares closed down 9% after posting a third-quarter net loss on a one-time charge and forecasting fourth-quarter results below analysts' average expectations.
Large-Cap up
The Burrill Large-Cap Biotech Index gained 5.23% on the month, and its year-to-date return reached negative 3.47%.
Genentech Inc.'s shares closed up 1%. During October, the Food and Drug Administration approved Avastin for lung cancer, and the approval was based on a phase 3 study that showed Avastin in combination with chemotherapy resulted in a 25% improvement in overall survival compared to chemotherapy alone.
Amgen Inc.'s third-quarter earnings showed that its revenues increased 14.5%. Burrill said this performance helped drive the company's shares up and they closed the month up 6%. Amgen also announced that it had completed its acquisition of Avidia, a privately held biopharmaceutical company currently developing a new type of treatment called Avimer proteins.
Amgen's increase in share price was enough to edge it back over Genentech for the ongoing title to be the world's largest biotech company by market cap. Genentech held off Amgen for several months, but by the end of October, Amgen's market cap was $88.1 billion and Genentech's was $87.3 billion, according to the release.
Mid-Cap up
The Burrill Mid-Cap Biotech Index increased by 10.59% in October, boosting its year-to-date return to 15.4%.
Leading the charge was New River Pharmaceuticals Inc. with an "astronomical" 99% leap in its share value, Burrill said. The excitement was caused when the company was issued an FDA approvable letter for its NRP104 that treats attention deficit hyperactivity disorder. Shire owns worldwide marketing rights for the drug, which will replace Shire's market-leading Adderall XR.
Illumina, Inc. chipped in with an impressive 31% rise in its share value by months' end on the strength of very positive third-quarter financial results.
Counterbalancing the large upswing of these two companies was the clinical trial disappointments of Renovis Inc. and Aspreva Pharmaceuticals Corp. Shares of Renovis lost more than three quarters of their value after its experimental stroke medicine licensed to AstraZeneca plc failed to meet its goal in a phase 3 trial. Aspreva share value finished down 34% in October after reporting that its CellCept for the treatment of myasthenia gravis failed to meet both primary and secondary endpoints in a phase 3 trial.
Small-cap up
The Burrill Small-Cap Biotech Index gained 10.25% during the month for a year-to-date return of 10.4%.
Heading the gainers was Pharmos Corp. Its stock was up 28% following its acquisition of Vela Pharmaceuticals Inc., whose most advanced drug, dextofisopam, is in phase 2 clinical trials for the treatment of irritable bowel syndrome.
Also chipping in was Monogram Biosciences Inc., up 21%, and Osteotech Inc., up 26%.
Genomics up
The Burrill Genomics Index had the best return for October with 14.9%. It wasn't enough to boost the index into the black, however, as its year-to-date return was negative 12.5%.
Every company in the index posted positive numbers in October. Leading the pack was Affymetrix, Inc. with a 21% gain on the strength of greater third-quarter revenues.
Millenium Pharmaceuticals posted a 20% gain in its share value even though it lost out in its bid to acquire Canadian-based AnorMED Inc. Genzyme Corp. won the bidding war for the Canadian biotech firm with an offer of $580 million, according to the release.
San Francisco-based Burrill & Co.'s principal activities are venture capital, merchant banking and media, with a focus on the life sciences.
Performance of Burrill biotechnology indexes
| Index | Dec. 31, 2005 value | Sept. 29 value | Oct. 30 value | October change | YTD change
|
| Burrill Biotech Select Index | 351.39 | 302.72 | 322.30 | 36.48% | -8.27%
|
| Burrill Large-Cap Biotech Index | 454.56 | 417.00 | 438.79 | 5.23% | -3.47%
|
| Burrill Mid-Cap Biotech Index | 155.59 | 162.31 | 179.50 | 10.59% | 15.37%
|
| Burrill Small-Cap Biotech Index | 125.73 | 125.92 | 138.85 | 10.27% | 10.44%
|
| Burrill Genomics Index | 117.19 | 89.19 | 102.17 | 14.90% | -12.55%
|
| Burrill Biotech IPO Index | 65.08 | 58.08 | 65.63 | 13.00% | 0.85%
|
| Burrill Agbio Index | 113.15 | 115.17 | 18.96 | 3.29% | 5.13%
|
| Burrill Industrial Biotech Index | 124.97 | 139.70 | 141.43 | 1.24% | 13.17%
|
| Burrill Diagnostics Index | 105.61 | 106.15 | 104.29 | -1.75% | -1.25%
|
| Burrill Nutraceuticals Index | 439.42 | 514.97 | 507.56 | -1.44% | 15.51%
|
| Nasdaq | 2,205.32 | 2,258.43 | 2363.77 | 4.79% | 0.32%
|
| Dow Jones Industrial Average | 10,717.50 | 11,679.07 | 12086.50 | 3.44% | 12.72%
|
| Russell 2000 | 673.22 | 725.35 | 770.36 | 5.72% | 13.91%
|
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