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Biotech Roars Back in November http://www.arizonabiotech.com/ http://groups.yahoo.com/group/biotech-news/ SAN FRANCISCO, Dec. 1 After two tough months for biotech, the industry roared back with the Burrill Biotech Select Index regaining the losses suffered during September and October, closing up over 6% in November. "Biotech is shaping up to have an exceptional year. With one month to go, the 18.5% increase in the Burrill Biotech Select Index compared with NASDAQ's 2.6% and the Dow's less than 1% gains since the beginning of the year is an incredible testimony to the successful industry's year," said G. Steven Burrill, CEO of Burrill & Company, a San Francisco based global leader in life sciences with principal activities in Venture Capital, Merchant Banking and Media. "Biotech's 'blue chip' companies such as Amgen (up 26% YTD), Genentech (up 77% in 2005), Vertex Pharmaceuticals Inc. (up a massive 141% so far in 2005), and Gilead (45%) have led the way. With the major capital market indicators flat over the same period, this is a clear indication that investors are putting their faith in biotech companies," added Burrill. "The performance of the Burrill Biotech indices is also a reflection of the fragile nature of the capital markets that we have seen over the past 11 months. The Burrill Large-Cap Index is up over 24% year-to-date; on the other hand, while some small and medium size biotech companies have fared well, overall the 16% loss in value in the Burrill Small-Cap Index demonstrates that the market is not yet ready to share the risk that accompanies many of these exciting and often earlier stage companies." Positive economic data stoked the general market conditions, which was buoyed by the news that the economy is recovering from the blow delivered by the Gulf Coast hurricanes. In addition, The Conference Board said that falling gasoline prices and an improved jobs outlook had lifted confidence in November to a reading of 98.9, up from 85.2 in October. "This macro-environment certainly had a very positive effect on biotech and the Burrill Biotech Select Index gained 6% in lockstep with the NASDAQ, which gained about the same amount and the Dow closed November up 4.3%," added Burrill. "But on the company front it was a 'business as usual' month for biotech with no big attention grabbing headlines. The main news was on the pharma front was Merck's announcement of a major restructuring designed to cut 7,000 employees or 11% of its workforce and close or sell five of its 31 manufacturing plants by the end of 2008 in the first phase of a reorganization strategy meant save up to $4 billion by the end of the decade. The restructuring plans come as Merck faces the loss of patent protection for its blockbuster cholesterol drug Zocor in 2006, plus thousands of lawsuits and billions in potential liability from its recalled painkiller Vioxx." Also in November, Pfizer Inc. (PFE) continued its torrid pace of business dealings with biotech by paying $40 million upfront and $734 million in potential milestones and royalties for access to Incyte Corporation's (INCY) portfolio of oral CCR2 antagonists, the most advanced of which is currently in Phase IIa studies in rheumatoid arthritis and insulin-resistant obese patients. Just as the Burrill Biotech Select Index is outperforming the markets, the same cannot be said for the AMEX Pharmaceutical Index (DRG), which year-to- date has dropped 3%. "Big pharma is reacting to its pipeline and investor blues," noted Burrill. "Drug discovery and development costs have risen dramatically over the years and the pipelines are drying up, and there is significant competition from generics. With consumers clamoring for lower prices and at the same time, regulators increasing scrutiny, and delaying approval (this translates into more costs), it's not a pretty picture for big pharma. But the biotech industry with its robust product pipeline is benefiting from the pharmaceutical industry's malaise ... as witnessed by the fact that pharma is willing to pay highly for access to biotech's innovation," Burrill continued. Big biotechs are also getting into the act of snapping up promising targets. On the last day of the month, Genentech announced that it had signed a deal with privately owned British biotech company PIramed Ltd. potentially worth up to $230 million for the development of PI 3-kinase, an enzyme involved in a large number of cancers. The collaboration is estimated to be one of the largest preclinical deals ever signed by a UK biotech company. Biotech Top Dog Watch Both Amgen and Genentech recorded positive gains in their share prices at 7% and 6% respectively. This was enough to push both companies at the $100 billion market cap mark. At the end of the month Amgen's market cap was $99.9 billion with Genentech just ahead at $100.8 billion. Genomics coming back The Burrill Genomic Index recorded the largest gain in November closing up over 8%, perhaps reflecting a changing investor sentiment for genomics and proteomics companies. Solexa, Inc. (SLXA), for example, announced that its scientists had sequenced a human bacterial artificial chromosome (BAC). Solexa expects its instrument system to be the first to dramatically reduce the cost, while also increasing the speed, of DNA sequencing. In particular, Solexa expects to be the first to deliver whole human genome sequencing at $100,000 per genome. The company's shares closed at $8.40, up 15%. Burrill Diagnostics Index (up 3.8%, down 2.1% YTD) A 90% increase in sales of Cepheid's (CPHD) molecular diagnostics products for the first nine months of 2005 as compared to the same period in 2004 helped boost the company's shares in November, which closed at $10.99, up 73%. Quidel (QDEL) also performed strongly in November with its shares closing the month up 20% at $13.96. With the media focusing on the potential of a bird flu pandemic, the company was the beneficiary of investor attention since it commands about 48% of the flu-testing market with its Quick Vue test. This test detects the presence of the more common influenza A and B viruses in patients' nasal swabs. While the diagnostic test isn't specifically designed to identify bird flu, some researchers have reported success in using Quick Vue to detect the H5N1 strain of the influenza virus. Although Third Wave Technologies Inc. (TWTI), a leader in personalized medicine, received FDA clearance for its Invader UGT1A1 pharmacogenetic test, designed to detect select polymorphisms associated with adverse reactions to Pfizer's chemotherapy drug, Camptosar, the company's shares closed the month in negative territory at $2.74, down 24%. Burrill MID-CAP Biotech Index (up 4%, 5.4% YTD) Shares of Adolor Corp. (ADLR) surged during the month after investment firm Lehman Brothers upgraded the company over recent progress with its bowel dysfunction treatment. Adolor has completed enrollment in a Phase III clinical trial, comprising approximately 660 patients, designed to evaluate Entereg(R) (alvimopan) for the management of postoperative ileus by acceleration of the time to recovery of gastrointestinal (GI) function following bowel resection surgery. The company's shares closed the month at$14.57, up 38% Cell Genesys, Inc. (CEGE) sold its manufacturing operation in San Diego to Genzyme Corp. (GENZ) for $3.2 million in cash. The operation was originally purchased by Cell Genesys from Chiron Corp. in 2001 for $4.8 million. Most of the approximately 40 employees formerly employed by Cell Genesys have become Genzyme employees. Shares of Cell Genesys closed up 9% at $5.85. It was a roller coaster ride for Pain Therapeutics Inc. (PTIE). Their shares tumbled in the month following their announcement that that a study showed its painkiller Oxytrex was less addictive than oxycodone, but the Phase III clinical trial failed since high dropout rates made the results not statistically significant. However, an analyst's upgrade helped stem the tide and the company's shares closed at $7.23 up 25%. Burrill SMALL-CAP Biotech Index (up 4%, down 15.7% YTD) Palatin Technologies, Inc. (PTN) was one of the top gainers with its shares closing up 58% even though financial results for their first quarter ending September 30, 2005 revealed a widening net loss. Palatin attributed this to increased R&D costs related to PT-141, a drug under development to treat male and female sexual dysfunction, and lower license fees from Mallinckrodt Healthcare related to NeutroSpec, the company's product for imaging and diagnosing equivocal appendicitis, which was approved by the FDA in July 2004. However, a reduced loss in Large Scale Biology Corporation's (LSBC) quarterly financials and a research license and option agreement with Growers Research Group LLC on LSBC's Geneware plant gene expression technology was not enough to stop a significant fall in their share value. LSBC closed at $0.33, down 40%. Alnylam Pharmaceuticals, Inc. (ALNY) who is developing novel therapeutics based on RNA interference was added to the NASDAQ Biotechnology Index. Its shares closed up 31% at $12.56 Shares for Avant Immunotherapeutics Inc. (AVAN) performed well in November, up 31%, with investors driving up their value following news that the company plans to develop a bird flu vaccine. Using in-house technology Avant said that it would devote research efforts toward finding a bird flu vaccine that can be kept at room temperature. Cellegy Pharmaceuticals, Inc. (CLGY) is facing delisting from the Nasdaq Stock Market since the market value of their common stock had been below the minimum price requirements. Cellegy has until December 19, 2005 to regain compliance. Its shares closed at $0.63, down 48% in November. Index 12/31/04 10/31/05 11/30/05 Percent Percent Value Value Value Change Change For Month For Year Burrill Biotech Select Index 287.54 320.33 340.74 6.37% 18.50% Burrill LARGE-CAP Biotech Index 368.59 432.70 457.68 5.77% 24.17% Burrill MID-CAP Biotech Index 162.53 164.69 171.29 4.01% 5.39% Burrill SMALL-CAP Biotech Index 148.96 120.65 125.57 4.07% - 15.70% Burrill Genomics Index 135.16 114.40 123.96 8.36% -8.29% Burrill Biotech 2003/4/5 IPO Index 78.11 68.09 68.69 0.88% - 12.06% Burrill Agbio Index 111.02 111.14 114.79 3.29% 3.40% Burrill Industrial Biotech Index 124.23 121.65 124.44 2.30% 0.17% Burrill Diagnostics Index 105.30 99.20 103.00 3.83% -2.18% Burrill Nutraceuticals Index 333.89 408.01 433.19 6.17% 29.74% Burrill Life Science Composite Index 200.25 223.38 230.91 3.37% 15.31% Index 12/31/04 10/31/05 11/30/05 Percent Percent Value Value Value Change Change For Month For Year Burrill Biotech Select Index 287.54 320.33 340.74 6.37% 18.50% NASDAQ 2175.44 2120.30 2232.82 5.31% 2.64% DJIA 10783.01 10440.07 10805.87 3.50% 0.21% Russell 2000 651.57 646.61 677.29 4.74% 3.95% SOURCE Burrill & Company Web Site: www.burrillandco.com http://www.arizonaentrepreneurs.com/ http://www.azhttp.com/ http://www.arizonabiotech.com/ <a href="http://www.arizonabiotech.com/";>Arizona Biotech</a> http://groups.yahoo.com/group/biotech-news/ <a href="http://groups.yahoo.com/group/biotech-news/";>Biotech News</a> http://www.arizonaentrepreneurs.com/ <a href="http://www.arizonaentrepreneurs.com/";>Arizona Entrepreneurs</a> http://www.azhttp.com/ <a href="http://www.azhttp.com/";>Arizona High Tech</a> Yahoo! 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