Set forth below is the scanned text of a “Special Advertising Section” that BIO.org published in the 12/29 issue of Fortune. Glad to see that this industry organization is doing its part to foment support for the biotech sector.
<<At this time last year, investors were more likely to believe in Santa Clause than in a new biotech bull market. Well, sorry Virginia, there is no St. Nick. But yes, investors, biotech stocks have bounced back and are making a dramatic recovery after three years in the Wall street woodshed.
The industry actually led the overall market rebound in 2003. Through the first three quarters of the year, the Nasdaq Biotech inex was up 40%, outperforming the Dow Jones industrial average and the Standard & Poor's 500 index, most other high-tech stocks, the big pharmas, and most blue chips. "Broadly speaking, there has been a clear rebound in public-sector biotech values," says Stewart Hen, a partner in Warburg Pincus, a leading member of the healthcare venture capital business. "There also has been incredible enthusiasm for biotech venture capital investment over the past few years, despite the fact that the public markets were down."
In 2000, the last time the biotech bulls were running on Wall Street, the stampede was triggered by excitement over the Human Genome Project. Stock prices of the newly minted genomic companies, most of which were less than ten years old, surged. The upward spiral slowed noticeably when investors realized it would take years, maybe decades, to develop commercial applications for the startling revelations that genomics provided scientists and researchers about human development and disease.
Investors were still feeling the pain earlier this year. At the close of the first quarter of 2003, the Nasdaq Biotech index was down 60% from its 2000 highs. From 2000 to the close of 2002, the industry as a whole gave back a whopping $170 billion in market value.
The recent recovery, which has focused new interest on the industry, has been led by the big biotechs-firms like Amgen, Genentech, Gilead Sciences, Chiron, Genzyme, Biogen, ldec Pharmaceuticals, and Medlmmune. The stock-price performance of These companies are leading the biotech transformation of health care into the 21st century. Genentech, for example, has won FDA approval of Xolair for asthma, and has received a recommendation from an FDA committee for approval of Raptiva, a this group has been out of sight in recent months, soaring significantly higher than the Nasdaq Biotech index. Investors have liked the big biotechs’ strong revenue growth, the FDA‘s approval of new medicines, and positive news about the even more advanced therapeutics that are now in late stage clinical trials. Through the first half of 2003, the FDA approved 17 new drugs. This compares with 20 for all of 2002.
The truly good news is that these product-driven companies are delivering effective new medicines to patients, not simply promises, and they are earning profits, not trading on dreams. Most of the companies were founded in the late 1970s and 1980s, and they are responsible for launching a revolution in health care. During the past 30 years, the biotech pioneers have proved that recombinant DNA technology works. More to the point, they have turned this knowledge into unique medicines to deal with such major illnesses as heart disease, cancer, diabetes, multiple sclerosis, and AIDS. These companies are leading the biotech transformation of health care into the 21st century.
Genentech, for example, has won FDA approval of Xolair for asthma, and has received a recommendation from an FDA committee for approval of Raptiva, a drug for the treatment of psoriasis. It also has filed for FDA approval of Avastin for colorectal cancer, which means the company could launch its third new product in 18 months. Avastin, a new class of drug, would be the first anti-angiogenesis therapy to reach cancer patients. To add frosting t o the cake, Genentech recently told analysts that its earlier projections of 2003 revenues of $3 billion are on track, which could produce earnings gains this year in the neighborhood of 20%. The company’s market capitalization topped $42 billion in early November, a 150% increase since the beginning of the year.
Other product-driven biotech companies are also being rewarded on Wall Street for their hard work. Some are well on their way to regaining the record stock market values achieved during the 2000 bull market, a phenomenon most experts believed would not occur again for many years. At the same time, investors who last year would have been more likely to take a chance on a lottery ticket than on a biotech stock are pouring fresh money into the industry. The new capital is not only going to big biotechs, but is also trickling down to smalland mid-cap companies that have promising new drugs in clinical trials.
During the first three quarters of 2003, publicly traded biotechs raised more than $8 billion. Venture capital firms invested another $2 billion in the industry during that span. Combining the two, biotech companies have attracted more than $10 billion in new money this year, second only to the record $30 billion in 2000.
These figures don‘t take into account initial public offerings (IPOs), which did not start surfacing until the fourth quarter. As the market values of publicly traded biotech companies took off during the second quarter, privately held companies started queuing up for IPOs, moving quickly to take advantage of what they hoped would be the first opportunity in three years to replenish their cash reserves with public funds. As of Sept. 30, about 15 biotech companies had registered for IPOs. If all 15 were priced at the top end of their suggested range, these offerings would bring another $1.4 billion into the industry.
The outlook for the IPO market is full of questions, however. Will, for example, the IPO window stay open wide enough and remain open long enough to give all the companies that want t o go public the opportunity t o do so? And will the companies be able to raise the money they need? Answers to these questions will say a lot about the industry’s future. They also will determine whether the biotech rally of 2003 extends into 2004.
As of mid-November, seven of the 15 companies had gone public, raising about $500 million. The last time the IPO window opened, in 2000,56 companies jumped through, raising an average of $90 million, for a total of $5 billion. And although only four companies went public in 2002, they raised $455 million, for an average of $1 14 million.
“Investors’ receptivity to new biotech IPO issues this year has been tepid,” says SG Cowen biotech analyst Eric Schmidt. ”Some companies have pushed faster than they should because the alternative t o not raising money is dire. Some of the better-positioned companies have yet to pull the trigger. They can afford to wait until the market is more receptive and valuations are higher.
Adds Hen or Warburg Pincus: ”In the past, companies could have an exciting new concept, and the IPO markets would embrace them. This is not a theme driven IPO market like the genome boom of 2000. This is a company-specific IPO market.” What this means, says Hen, is that today‘s investors want companies that not only are working on cutting-edge concepts but also have drugs in the pipeline that perform well in the lab and, better yet, have proved effective in clinical trials. Investors, simply put, are looking for early versions of Genentech.
Genentech, for its part, is not resting on its laurels. In addition to Avastin, which could reach the market early next year, the company is working on another colorectal cancer drug--Tarceva--which has shown an ability to halt tumor growth when used in combination with Avastin. Other colorectal-cancer products wending their way through the pipeline include Chiron Corp.’s Tezacitabine, M iIIennium PharmaceuticaIs’ VeIcade, and ABX-EGF, which is being developed by Abgenix and Amgen. While all are still in the testing phase, they suggest that the industry is involved in the kinds of efforts that typically pay off for investors. -Charles Craig>> |
