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Biotech Avoids Fall Out From Tough Quarter for Capital Markets
Date:4/1/2008

SAN FRANCISCO, April 1, 2008 /PRNewswire/ -- The biotech industry came through a very turbulent first quarter relatively unscathed with the Burrill Biotech Select Index, a price-weighted index tracking 20 of biotech's "blue chip" companies, finishing unchanged compared to the Dow, which closed down 7.5% and the Nasdaq, whose value dropped 14%.

"Despite a sea of red numbers for our other indices, the Burrill Biotech Select Index recorded a credible gain of close to 4% in the month of March," said G. Steven Burrill, CEO, Burrill & Company, a San Francisco based global leader in life sciences with activities in Venture Capital, Private Equity, Merchant Banking and Media. "This gain was in spite of the fact that the quarter was a bad one any way you sliced it. Investors have been shell shocked in the wake of not only surging oil prices (the declining dollar) and the housing slump but also near chaos in the financial markets with Wall Street almost imploding in the wake of a massive global liquidity crisis.

"While 'blue chip' companies such as Genentech and Gilead Sciences have so far weathered the market downturn, emerging companies have been less fortunate since they are perceived by investors as more risky," noted Burrill. "For example, the Burrill Mid Cap Biotech Index dropped over 23% in Q1 '08. This is why companies with broader-based product portfolios are able to ride out uncertain markets. Interestingly enough, investors have been choosing biotech's elite companies over big Pharma companies. This is reflected in the fact that the Amex Pharmaceutical Index closed the quarter down 12% at 295.23, its lowest total since October 2004."

Biotech IPOs on hold

The prevailing tough economic environment also took its toll on biotech IPO "hopefuls" with Biolex, Light Sciences Oncology and Archemix cancelling their planned offerings because of the market conditions. Only one company braved the market -- Bioheart, a biotechnology company focused on using cells derived from a patient's body for treatment of heart damage. It priced its 1.1 million shares offering at $5.25 the midpoint of a revised range. The company had originally filed for an offering of 3.6 million shares at a range of $14-$16. The company's shares closed the month of March at $4, down 24%.

The tough economic environment kept other biotech IPO "hopefuls" grounded on the runway. Several, however, did file for an IPO in order to get in line and be ready to respond rapidly to complete their IPO when the market improves:

-- Bayhill Therapeutics, a clinical stage biopharmaceutical company

developing products to treat autoimmune diseases,

-- CyDex Pharmaceuticals -- a specialty pharmaceutical company focused on

the development and commercialization of drugs specifically designed to

address limitations of current therapies in selected established

markets.

-- Omeros -- developing drugs to treat focused inflammation and disorders

of the central nervous system

-- Phenomix, a biopharmaceutical company focused on the development of

novel small-molecule product candidates for treatment of Type 2

diabetes and hepatitis C.

-- Zogenix developing treatments for central nervous system disorders and

pain.

Market cap

The industry's market cap closed at $442 billion, unchanged for March and down 2% for the quarter. Genentech's market cap closed the month at $85B -- the company's shares had a very good month (up 15.7%) and quarter (up 21%). Amgen shares slipped 10% in the quarter with the result that the company's market cap dropped to $45B. As a result, the company slipped one place in company rankings by market cap with Gilead Sciences closing the quarter at $47.8B. Shares of Gilead hit a new 52-week high by month end following new of strong sales of its HIV drugs Truvada and Atripla.

Biotech Indices

% %

12/31 2/29 3/31 change change

Index 2007 2008 2008 Month Qtr

Burrill Biotech

Select 331.52 318.05 330.24 3.83% -0.39%

Burrill Large

Cap Biotech 437.71 434.25 437.02 0.64% -0.16%

Burrill Mid-

Cap Biotech 201.89 161.7 155.2 -4.02% -23.13%

Burrill Small

Cap Biotech 137.6 150.15 146.74 -2.27% 6.64%

Burrill

Genomics 104.29 86.83 88.3 1.69% -15.33%

Burrill

AgBio 198.83 197.08 185.94 -5.65% -6.48%

Burrill

Industrial 158.66 160.09 159.98 -0.07% 0.83%

Burrill

Diagnostic 159.43 152.72 142.23 -6.87% -10.79%

Burrill

Nutraceutical 593.04 546.94 536.46 -1.92% -9.54%

NASDAQ 2652.28 2271.48 2279.1 0.34% -14.07%

DJIA 13264.82 12266.39 12262.89 -0.03% -7.55%

Russell 2000 766.03 686.18 687.97 0.26% -10.19%

Amex Biotech 786.5 721.95 737.41 2.14% -6.24%

Amex Pharma 338.52 305.15 295.23 -3.25% -12.79%

Partnering and financing still continue, but at a slower pace

Financings and partnering deals tracked by Burrill & Company collectively brought in approximately $6.6 billion for US companies in Q1 '08 with over $3.5 billion through financings and $3 billion in partnering capital. This total was the lowest raised in any quarter period since 2004.

The largest announced partnering deal in the quarter belonged to Genzyme Corp. and Isis Pharmaceuticals, Inc. They entered into a major strategic alliance in which Genzyme will develop and commercialize mipomersen, Isis' lipid-lowering treatment for high risk cardiovascular patients. Deal terms could add up to over $1.1 billion. Genzyme will pay Isis $150 million to purchase five million shares of Isis common stock and a $175 million up-front mipomersen license fee. In addition to this initial $325 million, Isis has the potential to receive significant milestone payments for mipomersen, which is currently in phase III trials. Once the product is launched, the two companies will share profits.

"It was only a matter of time before the frantic pace of biotech financing and partnering that the industry has experienced for the past three years slowed down," commented Burrill. "It is unlikely that we will see a return any time soon because of the market concerns about the continuing credit crisis and its impact on the economy."

US Biotech Financings ($M)

Q1 2008

2008

2005 2006 2007 Q1

Public

IPO $819 $920 $2,041 $6

Follow-ons $4,194 $5,766 $6,311 $701

PIPEs $2,376 $2,027 $1,618 $370

Debt $5,565 $13,978 $6,749 $1,622

Private

VC $3,518 $4,236 $4,425 $837

Other $1,114 $425 $611 $20

Total $17,586 $27,352 $21,975 $3,556

Partnering $17,268 $19,796 $22,365 $3,091

Total $34,854 $47,148 $44,340 $6,647


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SOURCE Burrill & Company
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