Biotech Weathers a Market Storm in February
SAN FRANCISCO, March 1 /PRNewswire/ — While the 416-point plunge in the Dow industrials on the penultimate day of the month took the wind out of biotech’s sails, which up until then was performing ahead of the general markets, it did not completely ruin what was a strong performance by biotechs. The Burrill Biotech Select Index held its own in February, up slightly at 0.24% in contrast to the Dow, which finished down 3.2% and the NASDAQ down 2.2%. It could have been much worse but, fortunately, Wall Street rebounded somewhat on the closing day as investors took comfort from comments by Federal Reserve Chairman Ben Bernanke but still remained uneasy about the economy. He allayed some of the fears about an economic slowdown in the US and Chinese economies that had fed the largest drop in the Dow since the fateful 9/11 five years ago.
However, there wasn’t enough time after the “recalibration” on Wall Street, February 27, for the biotech industry to recover the $20 billion that was shaved off its collective market cap that day, and which stood at $475 billion by month end. “The short-term weakness in biotech will give way to longer term strength and we expect to see biotech’s value hit the $500 billion mark by the end of the first quarter,” said G. Steven Burrill CEO, Burrill & Company, a San Francisco based global leader in life sciences with principal activities in Venture Capital, Merchant Banking and Media. “In times of stress, the market’s first reaction is to sell and to move to less risky/higher quality investments. We saw this ‘knee-jerk’ reaction with the Dow’s rapid fall. However, biotech has a good story and is robust enough to quickly recover from market hiccups,” he added.
One didn’t have to look far for a spate of positive news: Onyx Pharmaceuticals and its strategic partner Bayer said they were prematurely halting a clinical trial testing Nexavar in advanced liver cancer, based on an interim review of the very good data. Onyx plans to provide more complete data at the American Society of Clinical Oncology conference in June. Nexavar net revenue, as recorded by Bayer, was $165.0 million for the year ended December 31, 2006. Onyx’s shares finished February up a whopping 122% more than recovering from the bath its shares took following a setback with Nexavar in November when there were disappointing results in trials for it as a treatment for advanced melanoma.
Also on the regulatory front, the FDA approved Shire and New River Pharmaceuticals Inc.’s attention deficit hyperactivity disorder drug Vyvanse. The same companies added themselves to the growing list of M&A’s that are pervading the industry. Shire said that it would buy New River for approximately $2.6 billion in cash. Although financial terms were not disclosed, Pfizer said it would acquire BioRexis Pharmaceutical, which is developing long-acting GLP-1 receptor agonists for the potential treatment of patients with type 2 diabetes.
On the other side of the coin, Threshold Pharmaceuticals shares sank 59% by the close of February after it reported that a Phase III clinical trial of glufosfamide failed to show the drug could extend the lives of patients with advanced pancreatic cancer. The company said despite the results, it remains committed to further studying the compound.
IPO market still weak for biotechs
Despite the fact that five biotech IPOs were completed in February only 3SBio Inc., a Chinese biotech company, priced its IPO of 7.7 million American depositary shares at $16 each, above their announced pricing range. The remainder had to ameliorate their expectations:
— Rosetta Genomics Ltd. raised $26 million from 3.75 million shares at $7.00 per share. Rosetta’s current programs are focused on the development of microRNA-based diagnostic and therapeutic products for various cancers and infectious diseases. The company priced below its $7.50-$8.50 range. — Optimer Pharmaceuticals Inc. settled for selling 7 million shares at $7 a share, down from its initial $12 to $14 range. Optimer focuses on anti-infective drugs with its initial efforts aimed at treating gastrointestinal infections and related diseases. — Synta Pharmaceuticals Corp.’s debut received a cool reception after the stock priced well below its expected range and sold fewer shares than anticipated. At $10 a share, the IPO price fell well short of the $14 to $16 range. The company has two products in clinical trials. The most advanced, STA-4783, was awarded fast track designation status from the Food and Drug Administration for the treatment of metastatic melanoma. — Molecular Insight Pharmaceuticals Inc. offered 5 million shares at $14 a share, raising $70 million. The company is developing Azedra and Onalta, both radiotherapeutic treatments aimed at treating neuroendocrine tumors. Both products have Orphan Drug status from the FDA and Azedra has Fast Track status. Zemiva is the company’s lead molecular imaging product, aimed at diagnosing carida ischemia. Issue Share % Change Market Company Ticker Price Amount Price since Cap ($USD) raised 2/28/06 IPO ($M) ($M) ($US) Rosetta 26 85 Genomics ROSG $7 $7.55 8 % Optimer 49 220 Pharmaceuticals OPTR $7 $10.10 44 % 3S Bio SSRX $16 123 $14.16 -11 % 202 Synta 50 288 Pharmaceuticals SNTA $10 $8.53 -16 % Molecular MIPI $14 70 $13.18 -6 % 325 Insight Pharmaceuticals Average $10.80 $63 $10.70 4 % 224
Vancouver-based OncoGenex Technologies Inc. got caught up in the market upheaval and postponed its IPO because of the adverse conditions. Quebec-based EndoCeutics Inc., a firm developing hormone therapies for breast cancer and other endocrine-related disorders, added itself to the IPO runway.
INDICES Burrill Biotech Select Index (Month: 0.24% YTD: 4.6%)
The Onyx jump in share price helped offset most of the negative numbers recorder by the rest of the group. Vertex Pharmaceuticals’ shares closed down 13% mostly on the news that it expects deeper losses in 2007 as it invests in developing its hepatitis C drug candidate telaprevir. Gilead Sciences, Inc. closed February up 11%. The company completed a Phase II clinical trial of GS 9137, an oral HIV integrase inhibitor, and it met its primary endpoint. However, Gilead and partner Achillion Pharmaceuticals announced that they will halt development of their hepatitis C treatment GS 9132, or ACH-806. Amgen and Genentech’s shares closed the month down 9% and 3% respectively.
Burrill Large Cap Biotech Index (Month: -2% YTD: N/C)
Genzyme Corp. finished the month down 6% after it said that it was ending its partnership with Dyax Corp. on a DX-88 program aimed at treating angioedema, which causes swelling under the skin. Affymetrix Inc. (up 3%) said that it had started the full commercial launch of its SNP Array 5.0, which helps to better identify complex diseases such as autism, cancer, and diabetes. Biogen Idec Inc. lost ground in February (down 7%) after its reported fourth-quarter revenue fell short of Wall Street expectations.
Burrill Mid Cap Biotech Index (Month: -2.3% YTD: N/C)
Illumina Inc. plans to buy back $75 million of its shares over a six-month period using some of the $400 million raised from a debt offering. Its shares closed down 18%. Also in negative territory was Telik Inc.’s (down 13%). In the month it reported a widening net loss on higher operating costs and expenses. Neurochem closed down 15% even though it reported the completion of its 18-month North American Phase III clinical trial for tramiprosate for the treatment of Alzheimer’s disease (AD). Also in the loss column (down 12%) was Pain Therapeutics Inc. Its fourth-quarter loss widened despite higher revenue.
Burrill Small Cap Biotech Index (Month: 12.8% YTD: 12%)
Osteotech Inc. (up 38%) received the green light from the FDA for its bone-polymer biocomposite Plexur, which is used as a porous, resorbable scaffold that can be used to fill bony voids of the pelvis and extremities. XOMA Ltd. also recorded a solid gain of 25%. They have amended their existing agreement with Takeda Pharmaceutical to increase the number of potential therapeutic antibody programs under the collaboration initiated in November of 2006. With this expansion, XOMA estimates the aggregate upfront, R&D funding, milestone and other payments could exceed $230 million before royalties over the life of the agreement.
Pharmacyclics Inc. shares tumbled 38% after the company said the FDA deemed an application for its lead drug, Xcytrin, an injection for the treatment of non-small cell lung cancer patients with brain metastases, incomplete.
Percent Percent Index 12/30/05 12/29/06 1/31/07 2/28/06 Change Change Value Value Value Value For Month For Year Burrill Biotech Select Index 351.39 303.96 317.15 317.92 0.24 % 4.59 % Burrill LARGE-CAP Biotech Index 454.56 424.56 435.54 424.56 -2.52 % 0.00 % Burrill MID- CAP Biotech Index 155.59 171.55 175.78 171.74 -2.30 % 0.11 % Burrill SMALL-CAP – – Biotech Index 125.73 143.60 145.01 126.46 12.79 % 11.94% Burrill Genomics Index 117.19 101.69 107.50 103.62 -3.61 % 1.90 % Burrill Biotech IPO Index 65.08 63.33 65.43 63.04 -3.65 % -0.46 % Burrill Agbio Index 113.15 124.52 128.39 128.20 -0.15 % 2.96 % Burrill Industrial Biotech Index 124.97 150.85 145.68 143.35 -1.60 % -4.97 % Burrill Diagnostics Index 105.61 122.79 130.86 139.13 6.32 % 13.31 % Burrill Nutraceuticals Index 439.42 523.85 548.93 578.94 5.47 % 10.52 % Burrill Life Science Composite Index 231.35 213.07 220.02 219.69 -0.15 % 3.11 % NASDAQ 2205.32 2415.29 2463.93 2407.86 -2.28 % -0.31 % DJIA 10717.50 12463.15 12621.69 12216.24 -3.21 % -1.98 % Russell 2000 673.22 787.66 800.34 792.66 -0.96 % 0.63 %
Burrill & Company
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