Biotech Pauses for Breath in August


SAN FRANCISCO, Sept. 1 -- August is typically a slow month as
far as the capital markets are concerned and this year was no
exception. "This was certainly the case for biotech as the momentum
that industry has enjoyed
over the past four months tailed off," said G. Steven Burrill, CEO
of Burrill
& Company, a San Francisco based global leader in life sciences whose
principal activities are in Venture Capital, Merchant Banking and
Media.
"After biotech's strong run over the past four months, it was not
unexpected that there would be a cooling off period. However,
biotech has not
been caught in the downdraft affecting other markets but has remained
relatively stable during the past four weeks ... and has even shown
some
strength over the general market.
"With oil prices soaring, the price of a gallon of gas hitting
$3 at the
pump already, and consumer confidence weakening, the Burrill Biotech
Select
Index still managed to break even in August beating the Dow Jones
Industrial
Average, which closed down 1.5% and the NASDAQ, which was also off
by the same
amount," added Burrill.

Biotech Market Cap Race
Thanks to a last day of the month surge in its share price, and
Amgen's
shares remaining unchanged for the month, Genentech once again
captured top
ranking as the biotech company with the highest market cap. Closing
at $93.94,
Genentech's market cap stood at $99.97 billion, just above that of
Amgen,
whose market cap was $98.58 billion.
"It is interesting to note in this market cap rivalry that the
combined
market caps of Genentech and Amgen represents 41% of the collective
total of
the biotech industry, which at the end of August, stood at $474.13
billion,"
commented Burrill.
Genentech's share price was boosted on the news that they and
Biogen Idec,
Inc. (BIIB) had submitted a supplemental Biologics License
Application (sBLA)
with the FDA for a new indication for Rituxan (Rituximab) in
patients with
active rheumatoid arthritis (RA) who inadequately respond to an anti-
TNF
therapy.
The swing towards mergers and acquisitions with the absence of a
vibrant
IPO window continues. Dominating the headlines in August was OSI
Pharmaceutical's (OSIP) acquisition of Eyetech Pharmaceuticals
(EYET) for $935
million, representing about $20 per share, a 43% premium over
Eyetech's most
recent pre-merger announcement closing share price of $14.
"Even though the reaction from the Street to this deal was
decidedly mixed,
it is unlikely that we have seen the end of high profile M&A's,"
added Burrill.
"With big pharma on the prowl for promising drug candidates to
bolster their
product pipelines and with many companies still trading at
relatively low
valuations despite the rebound in the biotech indices in the second
quarter,
there are plenty of deals yet to be made.
"Nevertheless, we are continuing to see very strong performances
from some
of the companies in the Burrill Biotech 2003/4/5 IPO Index including
New River
Pharmaceuticals (NRPH), which, since it went public a year ago, has
risen over
400%. It is these types of gains and the general improvement of the
recent IPO
'class' that will be the forerunner for an early fall opening of the
IPO
window," Burrill stated.
"In addition, the recent success of the initial public offering
of Coley
Pharmaceutical Group Inc. (COLY) earlier in August, which priced six
million
shares at $16 per share at the top its estimated pricing range
should add
further confidence for other companies waiting on the IPO runway."
The
underwriters of the offering exercised in full their over-allotment
option to
purchase an additional 900,000 shares of common stock at the public
offering
price of $16.00 per share. With the purchase of the over-allotment
shares, and
a simultaneous private placement to Coley's collaboration partner,
Pfizer
Inc., a total of 7,525,000 shares of common stock were sold,
resulting in
gross proceeds of $120.4 million.
Coley's TLR Therapeutics(TM) act by stimulating toll-like
receptors
(TLRs), found in and on immune system cells, which, in turn, direct
the immune
system to fight disease. Coley focuses on drugs for cancers,
infectious
diseases and respiratory disorders. The company has signed lucrative
deals
with big- pharma such as Pfizer (PFE) and Sanofi-Aventis (SNY).
Shortly after
their IPO shares reached $18.45, before dropping back to close out
the month
at $16.25, an increase of 1.5% from the offering price.

Burrill Biotech 2003/4/5 IPO Index (Up 2.7%, down 6.9% YTD)
The appetite for IPOs, which has been virtually non-existent for
almost
four months, could return if this IPO class maintains their
collective steady
improvement. In August, thanks to spectacular gains by Myogen
(MYOG), which
rose a remarkable 89%, to close at $20.70, the Burrill Biotech
2003/4/5 IPO
Index posted a modest gain of 2.7% Although Myogen was trading in
the $6 range
four months ago, its dramatic increase was fuelled by the news that
Myogen's
Phase IIb clinical data for its drug darusentan had shown to be
effective in
treating patients with hypertension who have not responded well to
standard
drug regimens. The company now plans to proceed with Phase III
clinical trials
for the drug. Myogen currently has one drug on the market, in
Europe, called
Perfan, a treatment for heart failure. In addition to darusentan,
the company
is developing a treatment for pulmonary hypertension called
ambrisentan
New River Pharmaceuticals (NRPH) once again posted an impressive
25% gain,
closing at $43.09, on news that the company would emphasize its
abuse-
deterring formulation of hydrocodone, rather than its abuse-deterring
formulation of hydromorphone. The company says that it also remains
on track
to file this fall for FDA approval of its formulation of amphetamine
for ADHD.
Also chipping in with solid gains was Eyetech (EYET) following
the
announcement that OSI Pharmaceuticals planned to acquire the
company. Eyetech
closed up a respectable 61% at $18.28. MannKind Corporation (MNKD)
also closed
up 54% for the month. The company completed a $175 million private
placement
of newly issued shares of common stock and the concurrent issuance
of warrants
for the purchase of additional shares of common stock.
Not so fortunate was Renovis (RNVS) who announced disappointing
results
from its Phase II clinical trial studying REN-1654 in patient-
volunteers with
sciatica, a form of neuropathic pain. The results indicate that,
although REN-
1654 showed a positive trend in pain relief, it did not reach
statistical
significance in its primary endpoint of change in average daily
spontaneous
pain ratings at the end of a three-week treatment period compared to
placebo.
Its shares closed at $13.26, down 13% on the month.

Burrill Biotech Select Index (Up 0.38% and 15.8% YTD)
For once, it wasn't Genentech (DNA) or Amgen (AMGN) keeping the
Burrill
Biotech Select Index in positive territory, with Amgen closing out
the month
unchanged and Genentech posting a late 5% surge. It was Vertex
Pharmaceuticals
Inc. (VRTX) that carried the load in August closing up 15% at
$18.05. The gain
was spurred by analysts at J.P. Morgan who upped their rating of the
biotechnology stock to overweight from neutral. They based their
upgrade on
promising Phase I clinical data on the company's hepatitis C virus
(HCV)
treatment, VX-950 for which the company expects to be able to file
for U.S.
regulatory approval in 2008.
CuraGen Corp.'s (CRGN) shares slipped and closed the month at
$4.37, down
31%. News that it expects to generate about $21 million in a public
offering
of its stock to pay down debt was not well received by its
shareholders. Its
stock is down about 34% year to date.

Burrill LARGE-CAP Biotech Index (up 0.9%, 21.4% YTD)
Shares of Genzyme Corp. (GENZ) were off 4% for the month largely
due to a
downgrade by Lehman Brothers, who cited risks to long-term growth
for a number
of the biotechnology company's products. Also dragging the Index
into negative
territory was Human Genome Sciences Inc. (HGSI), whose shares closed
at
$12.91, down 12% for August. The news that GlaxoSmithKline (NGSK) had
exercised its option to develop and commercialize HGS-ETR1
(mapatumumab)
jointly with Human Genome Sciences obviously failed to impress
investors.

Burrill MID-CAP Biotech Index (-4.9%, 3.2% YTD)
DOV Pharmaceutical Inc.'s (DOVP) 29% drop in its share price
helped
contribute to the 5% loss that the Burrill MID-CAP Biotech Index
sustained in
August. DOV Pharmaceutical suspended further dosing in a pivotal-
stage
clinical trial of ocinaplon, its experimental anti-anxiety agent,
due to
concerns about liver enzyme levels. The company said it will
continue to
monitor the subjects and patients currently enrolled in the trial.
Once the
analysis is complete, it will decide whether to continue with
ocinaplon or
select a back-up compound.

Burrill SMALL-CAP Biotech Index (-0.8%, - 10.7% YTD)
Although almost 70% of the companies in the Burrill SMALL-CAP
Biotech
Index lost ground in August, the Index only recorded a 0.8% drop.
The negative
numbers were offset in part by NeoRx Corporation (NERX), which was
the biggest
gainer closing the month at $1.01, up 53%. The company reported a
positive
second quarter initiating a Phase II clinical trial in patients with
small
cell lung cancer. NeoRx also joined with The Scripps Research
Institute in the
first scientific collaboration at Scripps Florida, focusing on
developing
therapeutic agents to treat cancer. The company believes that this
collaboration potentially will offer important opportunities to
license novel
cancer products for its pipeline.
Although both Aphton Corp. (APHT) and Avancis Pharmaceutical
Corp. (AVNC)
did not issue any significant news during the month, their stock
price dipped
by 28% and 37% respectively. In addition, following a decline in
its share
price Kosan Biosciences Incorporated (KOSN) terminated a planned
offering of
4,500,000 shares of common stock. The company's share price closed
the month
at $7.35, down 18%.

Percent
Percent
Index 12/31/04 7/29/05 8/31/05 Change
Change
Value Value Value For Month
For Year

Burrill Biotech
Select Index 287.54 331.71 332.98 0.38%
15.80%
Burrill LARGE-CAP
Biotech Index 368.59 443.34 447.49 0.94%
21.41%
Burrill MID-CAP
Biotech Index 162.53 176.54 167.79 -4.96%
3.24%
Burrill SMALL-CAP
Biotech Index 148.96 134.14 132.96 -0.88% -
10.74%
Burrill Genomics
Index 135.16 141.63 137.13 -3.17%
1.46%
Burrill Biotech
2003/4/5 IPO Index 78.11 70.80 72.70 2.68% -
6.93%
Burrill Agbio
Index 111.02 113.57 109.72 -3.38% -
1.17%
Burrill Industrial
Biotech Index 124.23 133.48 130.35 -2.35%
4.92%
Burrill Diagnostics
Index 105.30 104.15 103.95 -0.19% -
1.28%
Burrill
Nutraceuticals
Index 333.89 420.79 436.01 3.62%
30.58%
Burrill Life
Science Composite
Index 200.25 224.53 227.35 1.26%
13.54%

Percent
Percent
Index 12/31/04 7/29/05 8/31/05 Change
Change
Value Value Value For Month
For Year
Burrill Biotech
Select Index 287.54 331.71 332.98 0.38%
15.80%
NASDAQ 2175.44 2184.83 2152.09 -1.50% -
1.07%
DJIA 10783.01 10640.91 10481.60 -1.50% -
2.80%
Russell 2000 651.57 679.75 666.51 -1.95%
2.29%

SOURCE Burrill & Company

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