Biotech Pulled Down by Capital Markets in May
June 02, 2010
SAN FRANCISCO - June 1, 2010 - The Burrill Biotech Select Index recorded a 10 percent drop in May to close below 300 for the first time in almost 18 months. Volatile capital markets that saw the Dow briefly dip below 10,000 for the first time since early February was the main drag on the Index. Ongoing concern that the euro-zone debt woes may escalate into a global financial crisis fueled the downturn. The Dow Jones Industrial Average closed down 8 percent for the month its worst May performance since 1962 and the Nasdaq Composite Index suffered a similar monthly drop.
"At one time, in periods of economic uncertainty, investors would move into the relative safety of biotech and pharma," said G. Steven Burrill, CEO, Burrill & Company, a San Francisco based global leader in life sciences with activities in private equity, venture capital, merchant banking and media, "however, this is no longer the case and for the foreseeable future biotech's fortunes will be linked with the performance of the broader capital markets."
Biotech's "blue chip" companies were hit hard in May with the top five biotech companies by market cap all losing an average of 10 percent of their share values. Amgen's share price closed down 10 percent despite reporting that its new drug Prolia, or denosumab, had been approved in Europe as a treatment for osteoporosis. The favorable decision from the European Commission had been expected following a positive recommendation by the European Medicines Agency in December.
Amylin Pharmaceuticals' shares closed the month down 20 percent, the largest share drop among the companies in the Burrill Biotech Select Index. In addition to the tough market conditions, its shares lost value on news that along with its partners it will have to wait until October for the U.S. Food and Drug Administration to make a regulatory decision on the potential diabetes drug Bydureon, a once-weekly version of the injectable treatment Byetta, which is currently taken twice daily.
Canadian biotech Aeterna Zentaris bucked the general downward trend. The company's shares were up 44 percent in May after reporting that it had received a positive opinion for an orphan medicinal product designation from the Committee for Orphan Medicinal Products (COMP) of the European Medicines Agency for its compound AEZS-108 for the treatment of ovarian cancer. The Canadian Biotech Index was down 5 percent in May.
Despite the tough capital markets one biotech company completed its IPO at the end of the month. GenMark Diagnostics, formerly known as U.K.-based Osmetech, raised $28 million by offering 4.6 million shares at $6, the low end of its revised $6-$7 range. The company had originally planned to sell 4.5 million shares at a range of $8-$10. The company closed its first day of trading down 10 percent. Trading in Osmetech's shares on the London AIM were halted in advance of the IPO.
To date there now have been eight biotech IPOs completed and their average market performance as of the end of May is 16.5 percent below their IPO price.
Ironwood Pharmaceuticals $11.25 $11.74 4
Anthera Pharmaceuticals $7.00 $5.95 (15)
AVEO Pharmaceuticals $9.00 $8.01 (11)
Alimera Sciences $11.00 $8.74 (15)
Tengion $5.00 $4.24 (15)
CorMedix $3.00 $2.71 (10)
Codexis $13.00 $10.34 (20)
GenMark Diagnostics $6.00 $5.40 (10)
BY THE NUMBERS*
The industry closed the month with a collective market cap of $341.25 billion (down 10.7 percent for the month)
56 biotech companies (18.4 percent) have market caps greater than $1B (compared to 49 companies at the same time last year)
93 biotech companies (30.5 percent) have market caps less than $100M (compared to 39 percent (122 companies) at the same time last year)
The Burrill Biotech Select Index is down 5 percent year-to-date.
Several companies completed secondary financings in May including Pharmasset, which raised $101.1 million and Jazz Pharmaceuticals, which raised $58.5 million and will use the funds to repay a portion of its outstanding senior secured notes.
* Compiled by The Burrill Report. The June edition of the subscription-based Burrill Report has a breakdown of the industry's May performance and complete global financings, M&A and partnering transactions. Copies are available on request.
Burrill Biotech Indices
05/28/10 % CHANGE (MONTH) % CHANGE (YR)
Burrill Select 312.47 330.08 297.21 -9.96% -4.88%
Burrill Large Cap 461.85 525.4 468.31 -10.87% 1.40%
Burrill Mid-Cap 166.01 180.42 163.85 -9.18% -1.30%
Burrill Small Cap 88.12 101.65 87.49 -13.93% -0.71%
Burrill Genomics 159.87 172.21 159.08 -7.62% -0.49%
Burrill Diagnostics 147.96 155.36 138.33 -10.96% -6.51%
Burrill Personalized Medicine 91.71 95.87 88.94 -7.23% -3.02%
Canadian Biotech 57.32 47.81 45.35 -5.16% -20.88%
NASDAQ 2269.15 2461.19 2257.04 -8.29% -0.53%
DJIA 10428.05 11008.61 10136.63 -7.92% -2.79%
Amex Biotech 941.92 1198.77 1051.9 -12.25% 11.68%
Amex Pharmaceutical 309.21 296.36 271.23 -8.48% -12.28%
About Burrill & Company
Founded in 1994, Burrill & Company is a San Francisco-based global leader in life sciences with activities in Venture Capital, Private Equity, Merchant Banking and Media. The Burrill family of venture capital funds has over $950 million under management and its merchant banking business is one of the industry leaders in life sciences transactions. Burrill is also the creator, sponsor and facilitator of leading industry conferences worldwide and publisher of a range of bio-intelligence reports including the monthly Burrill Report (www.burrillreport.com) and annual "State of the Industry" report, the latest of which has just been released entitled Biotech 2010-Life Sciences: Adapting for Success.