Biotech has Positive Year Despite Weak Fourth Quarter Performance

Burrill looks back at 2007

04-Jan-2008

"The biotech industry finished the year in good shape with the Burrill Biotech Select Index, a price-weighted index tracking 20 of biotech's "blue chip" companies, gaining 9% in 2007 ahead of the Dow, which finished up 6.4% and on par with the Nasdaq, which closed up 9.8%," said G. Steven Burrill, CEO, Burrill & Company. "It could have been an even better year were it not for a sub-par final quarter of 2007, one that is usually one of biotech's best."

The Burrill Biotech Select Index dropped over 6% in December (down 5% in the quarter) on the heels of a tough month for Neurocrine Biosciences (down 65%), Celgene (down 25%), Amgen (down 16%) and Genentech (down 12%). It was "deja vu all over again" for Neurocrine. In 2006, the company's share price lost almost 80% of its value. While it did recover during 2007, the company's shares lost more than half their value in December, plunging to an eight-year low, after the Food and Drug Administration asked the company for additional data on Indiplon - its insomnia treatment drug candidate. Celgene stumbled over concerns of weak November sales for its leading cancer drug Revlimid, which it markets as a treatment for two cancers of the blood - multiple myeloma and myelodysplastic syndrome. Onyx Pharmaceuticals Inc. had a much more positive story ... while down 62% in 2006 following a Phase III product trial stumble ... the company recovered nicely and has been one of Wall Street's "darlings" all year long with its stock value finishing the year up a massive 426% on positive clinical trials data.

"In 2006 the Burrill Biotech Select Index suffered a 14% loss," noted Burrill. "The claw back of a substantial portion of that drop in 2007 is thanks to the stellar annual gains from companies other than Amgen and Genentech, who traditionally lead the way, with Onyx Pharmaceuticals, Incyte (up 72%) and Gilead Sciences (up 42%) leading the pack in 2007."

It certainly was an unusually tough year for industry giants Amgen and Genentech. Amgen, whose share price closed December at a five-year low, never really recovered from some bad news about its key anemia-fighting drugs, Epogen and Aranesp, which together account for 46% of sales and 60% of profits. Clinical trial data earlier this year raised safety concerns about the whole class of similar drugs when prescribed in high doses or for unapproved indications. Genentech became a victim of its own outstanding success of two years ago and has suffered from two straight years of negative stock price returns with investors believing that its growth had reached a peak.

"Six biotech IPOs were completed in Q4 07," commented Burrill, "bringing the number of new biotech IPOs in 2007 to 28 just about the number we predicted would get done in the year (30). The total amount raised from these IPOs was $2 billion, double the $920 million raised in 2006. The average amount raised per IPO is also considerably higher -- $73 million versus $50 million in 2006.

The post IPO performance of these newly minted public companies was not great with 60% of them closing the year below their opening share price. Bucking that trend were notable gainers: Genoptix, Pharmasset and WuXi PharmaTech. WuXi, a China-based biotechnology R&D outsourcing company raised $212 million on the NYSE offering 15.1 million ADSs, at $14 per ADS, a 16.6% premium to the midpoint of its proposed $11 to $13 range. The company's shares closed the year up 121%. Genoptix provides specialized laboratory services to hematologists and oncologists, raised $85 million pricing its 5 million share offering at $17, above its proposed $14-$16 range. Investors liked the company's prospects and the company's share price closed the year up 79%. Pharmasset also fared well after raising $45 million in April with its IPO. It is developing and commercializing novel drugs to treat viral infections and buoyed by a partnership with Roche, the company's share value rose 50% by the end of the year.

"Investors are warming to the fact that the transition to a more personalized medicine world is taking hold and companies such as Genoptix are benefiting from this new reality," said Burrill. "We saw a 38% jump in the value of our newly created Burrill Personalized Medicine Index and a 30% annual jump in the Burrill Diagnostic Index. "Investors are taking a keen interest in tools and platform companies once again. Personalized medicine is creating the need for molecular diagnostics, biomarkers, genotyping assays, etc. and so companies specializing in these areas have received positive investor attention."

https://www.bionity.com/en/news/76213/biotech-has-positive-year-despite-weak-fourth-quarter-performance.html