Biotech Survives Market Turbulence in November
Wall Street closed out a volatile month and although the Dow ended the final week of November with gains, it still posted a 4% decline for November. This was even in wake of its biggest percentage gain in four and a half years during the month. "Investors remained extremely nervous about inflation, oil prices and the weakness in the economy," said G. Steven Burrill, CEO, Burrill & Company. "Although not totally immune from the market turmoil, biotech held its own and the Burrill Biotech Select Index was only down marginally, in stark contrast to the NASDAQ, which took a 6% hit in November."
"Biotech had a great deal of news to keep investors interested during the month... particularly on the M&A front with companies having their own version of the traditional consumer 'Black Friday' spree," noted Burrill.
Celgene Corp. vaulted itself into biotech's top five by market cap with its acquisition of Pharmion Corp. for $2.9 billion in cash and stock. The move is part of its drive to become a major global player in developing and marketing blood-cancer drugs.
"The deal reflects the intense competition among drug makers for acquisitions to improve their pipelines," explained Burrill. "M&A has become a staple in biotech land. There is pressure on the management of pharmaceutical and biotech companies to perform and increase shareholder value and M&A has become the tool of choice to do this. Not only are we seeing biotechs acquiring biotechs but the pending expiry of patents on a number of blockbuster pharmaceuticals has stoked demand by big pharma for small innovative biotechs that can be easily acquired and integrated. Sanofi-Aventis, for example, says that it plans to aggressively pursue biotech buyouts. As more big developers fill their pipelines with biologics, competition for the most promising biotech drugs will be intense.
"Among the glut of transactions during November was Glaxo's acquisition of privately-held Reliant Pharmaceuticals for $1.65 billion and Pfizer's acquisition of Coley Pharmaceuticals for $164 million. Reliant was planning $400 million initial public offering and its decision to be acquired provided a major premium for the company's investors.
"The environment for M&A is bullish right now... so much so that biotech's are planting 'for sale' signs on their lots," Burrill explained. "Following Biogen Idec, which put itself up for sale last month, Vancouver-based QLT said it was seeking potential buyers for some or all of its assets and MGI Pharma announced that it was looking at its options including a buyer."
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