Biotech Drops Amid Tough Markets in February

SAN FRANCISCO, March 3 /PRNewswire/ -- For the second month in a row the capital markets succumbed to fears of inflation and a weakening economy. On the last day of the month the Dow dropped over 300 points after oil prices pushed past $103 per barrel for the first time. Amid these fears, biotech was dragged down with the Burrill Biotech Select Index dropping 4% along with the NASDAQ, down 5% and the Dow, which closed down 3%.

"The biotech sector started 2008 on a positive note, outperforming the major indices in January," said G. Steven Burrill, CEO of Burrill & Company, a San Francisco based global leader in life sciences whose principal activities are in Private Equity, Venture Capital, Merchant Banking and Media. "However, in the wake of negative news from biotech's top performer Onyx Pharmaceuticals, the industry took a hit."

Onyx was the best-performing biotech stock of 2007, notching a one-year return of 440% ... but the company dropped 42.5% in February after reporting its cancer drug Nexavar failed a Phase III study in lung cancer patients. The study was testing the combination of Nexavar and the chemotherapy drugs carboplatin and paclitaxel in patients with non-small-cell lung cancer.

One of the few companies in the Index group to post a gain in February was Genentech (up 8%) on the strength that Avado, a Phase III study evaluating its cancer drug Avastin in combination with docetaxel chemotherapy, met its primary endpoint of prolonging progression-free survival in patients with advanced breast cancer. The Roche-sponsored Avado study investigated the addition of Avastin administered in two different dosages in combination with chemotherapy. Both doses of Avastin in combination with chemotherapy showed "statistically significant improvement" in the time patients lived without their disease advancing compared with chemotherapy and placebo.

The other was Illumina (up 13%). Its fourth-quarter revenue was up an impressive 86%. On the other side of the coin, shares of Vertex Pharmaceuticals were down 14% after reporting that a wider fourth-quarter loss will retard its 2008 outlook, which was below Wall Street expectations.

The Burrill Biotech Mid-Cap Index dropped 9% as investors migrated away from these companies. "Even though the pharmaceutical and biotech sectors are among the best for investors to be in during a recession, it is the blue-chip companies that they seek out. In difficult market conditions emerging biotech companies are viewed as more risky investments which is why most companies in the group lost value," noted Burrill.

Biotech IPOs remain on hold

The prevailing tough economic environment 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.

Market cap

The industry's market cap closed at $440 billion, unchanged for February. Genentech's market cap closed the month at $79B and second placed Amgen slipped 2% to $49B. Close on Amgen's heels is Gilead Sciences, which closed February at $44B.

    Biotech Indices

    Index            12/29/06  12/31/07   1/31/08  2/29/08   %        %
                                                             change   change
                                                             Month    Year

    Burrill Biotech
     Select           303.96    331.52    331.31   318.05    -4.00%  -4.06%
    Burrill Large
     Cap Biotech      424.56    437.71    438.87   434.25    -1.05%  -0.79%
    Burrill Mid-Cap
     Biotech          171.55    201.89    179.33    161.7    -9.83% -19.91%
    Burrill Small
     Cap Biotech       143.6     137.6     148.3   150.15     1.25%   9.12%
    Burrill Genomics  101.69    104.29     93.64    86.83    -7.27% -16.74%
    Burrill AgBio     124.52    198.83    193.82   197.08     1.68%  -0.88%
    Burrill
     Industrial       150.85    158.66    146.41   160.09     9.34%   0.90%
    Burrill
     Diagnostic       122.79    159.43    151.53   152.72     0.79%  -4.21%
    Burrill
     Nutraceutical    629.56    593.04    556.24   546.94    -1.67%  -7.77%
    NASDAQ           2415.29   2652.28   2389.86  2271.48    -4.95% -14.36%
    DJIA            12463.15  13264.82  12650.36 12266.39    -3.04%  -7.53%
    Russell 2000      787.66    766.03     713.3   686.18    -3.80% -10.42%
    Amex Biotech      754.25     786.5    749.38   721.95    -3.66%  -8.21%
    Amex Pharma       345.06    338.52    316.45   305.15    -3.57%  -9.86%