Biotech Avoids Fall Out From Tough Quarter for Capital Markets

SAN FRANCISCO - 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.