The Biotech Century Begins With A Boom; The Year 2000: Biotech's Best Year of Financing Ever
SAN FRANCISCO, Jan. 2 /PRNewswire/ -- By almost any measure the biotech
industry had a phenomenal year in 2000: the market cap for the industry grew
from $311 billion at 1999's year-end to over $500 billion by mid-March; the
industry then experienced its largest one-day loss in value ($109 billion)
based on some errant comments by President Clinton and Prime Minister Blair;
67 IPOs were completed (the most in any year in biotech's 25+ year history);
nearly $39 billion was raised; and the industry market cap at year-end was
$429 billion, up 38 percent from a year earlier. On the scientific front, the
beginning of the New Millennium also started out on a high note, anticipating
the June announcement by Celera and the Human Genome Project that they had
fully sequenced the human genome, claimed by many to be one of humankind's
greatest achievements.
"The Millennium started out with a bang, and just kept going," said G.
Steven Burrill, CEO of Burrill & Company, a San Francisco-based private
merchant bank focused exclusively on life sciences. "First we saw a rush of
IPOs, ushered in by the IPO window that opened late in '99; then we had the
incredible anticipation and triumph of the deciphering of the human genome; we
saw the industry take a dive, from the effects of President Clinton's and
Prime Minister Blair's erroneous comments regarding genetic patenting. And to
top off it off, the industry ended up raising $39 billion this year, compared
to $16 billion in '99, and $5 billion each in '96, '97, and '98."
During the fourth quarter of 2000, the industry raised over $12 billion in
equity, well over all of 1999's total fundraising and almost twice the amount
raised in the third quarter of the year. "While IPO activity for the quarter
slowed as we reached the year-end, follow-ons were truly spectacular," said
Burrill. "We had three follow-ons that netted over $4.3 billion: Human Genome
Sciences (HGSI), Immunex (IMNX), and Millennium (MLNM)."
While the money rolled into the industry, though, biotech stock values
took a beating during the last quarter. The combination of the dramatic drop
in technology stock prices in general, a "softening" of the economy,
profit-taking in high-tech and biotech stocks after a spectacular run-up in
values earlier in the year, and investor concern for biotech companies'
revenue and earnings potential all contributed to a lackluster close of the
year for biotech stock values. According to the Burrill Life Sciences
Indices, large-cap companies saw an average decrease of 7 percent for the
quarter, while the mid-cap and small-cap companies were down 25 percent and
35 percent, respectively.
The Burrill Life Science Composite Index (an average of all of the other
Burrill Life Sciences indices) was down 11 percent. In a quarter in which
Nasdaq (down 33 percent), Dow (up barely 1 percent), and Internet stock
performance was marginal, biotech's relative performance was appreciably
better. The year's numbers were impressive however-the Burrill Life Sciences
Composite Index up 24 percent; the large-cap, mid-cap, and small-cap indices
up 41, 40, and 12 percent, respectively.
IPOs: The Window Closes ... Finally
After an astonishing 67 IPOs in 2000, the public markets finally had their
fill, as the number of IPOs completed dropped from a high of 32 in the third
quarter, to just 12 in the final quarter of the year. "The IPO-mania that
swept the industry finally dissipated during the fourth quarter," said
Burrill. "The great run-ups in value that we saw following many of the IPOs
earlier in the year caused a lot more IPOs to come to the market, but by the
fourth quarter, the premiums had disappeared and we saw tougher offerings
getting done with reduced size and 'below the range' pricing."
The 12 companies that completed IPOs during the quarter raised a total of
$1.3 billion, down by almost half from the third quarter of 2000
($2.7 billion), but still over three times the amount raised in the fourth
quarter of 1999 ($343 million). The most significant IPO that occurred during
the quarter was Monsanto's whopping $700 million IPO, a massive offering that
represented well over half the amount raised by IPOs during the fourth
quarter. Monsanto's IPO was also the industry's largest IPO since Genentech's
mega-IPO that raised $1.9 billion in 1999.
First-half 2000 IPOs priced at an average of $15, rose on average
270 percent to their 52-week highs, then by year-end settled at 12 percent
above their offering price. Second-half 2000 IPOs priced at an average of
$14, rose on average 100 percent to their 52-week highs, then by year-end
settled at 2 percent below their offering price.
The companies that went public this quarter included:
Company Ticker IPO Date Offering Amount
Symbol Price Raised
(in $M)
Informax INMX 10/3 $16.00 $80
Kosan Biosciences KOSN 10/5 14.00 70
POZEN, Inc. POZN 10/10 15.00 75
Introgen Therapeutics INGN 10/12 8.00 32
Monsanto Co. MON 10/18 20.00 700
MediChem LS MCLS 10/26 7.00 44
AeroGen,Inc. AEGN 11/12 12.00 43
Adolor ADLR 11/14 15.00 90
Array Biopharma ARRY 11/16 7.50 49
Rigel Pharmaceuticals RIGL 11/29 7.00 35
Harvard Bioscience HBIO 12/7 8.00 51
GenVec GNVC 12/12 9.50 38
SUMMARY Total # Avg. Offr. Total
Of IPOS: Price Raised*:
12 $12.00 $1,307
Company Ticker Price at Percent Market Cap
Symbol Qtr End Change at Qtr End
(12/29/00) (in $M)
Informax INMX $ 8.6 -46.5 $202
Kosan Biosciences KOSN 11.4 -18.8 264
POZEN, Inc. POZN 19.4 29.2 499
Introgen Therapeutics INGN 5.3 34.4 149
Monsanto Co. MON 26.2 30.9 6,982
MediChem LS MCLS 5.1 26.8 123
AeroGen,Inc. AEGN 8.8 -27.1 274
Adolor ADLR 21.1 40.8 501
Array Biopharma ARRY 9.2 22.5 196
Rigel Pharmaceuticals RIGL 9.1 30.4 396
Harvard Bioscience HBIO 10.4 29.7 235
GenVec GNVC 9.5 0.0 169
SUMMARY Avg. %
Change:
12.7
* does not include over-allotment purchases
While it appeared that investors had their fill of IPOs by the fourth
quarter, their appetite for follow-ons (with over $7.8 billion raised in
follow-ons and secondaries) was nothing short of ravenous. Most notable was a
"monster" follow-on conducted by Immunex Corp's (IMNX), totaling $3.2 billion
and composed of both new Immunex shares and Immunex shares owned by American
Home Products Corporation (AHP), making the offering the largest biotechnology
stock offering to date; Human Genome Sciences' (HGSI) $825-million follow-on
at the end of October, and Millennium's (MLNM) $704 million secondary.
Fourth quarter 2000 secondaries included:
4Q00 FOLLOW-ONS
Company Ticker Amount Price at Price at Percentage
Symbol Raised Secondary 12/29/00 Change
(in $M)
Albany Molecular
Research AMRI 127 48.4 61.6 27.27
ArQule ARQL 76 22.50 32.0 42.22
Bone Care
International BCII 37 16.00 17.31 8.19
Cima Labs CIMA 148 50.00 65.06 30.12
Corvas CVAS 100 20.00 14.38 -28.10
CuraGen CRGN 197 41.00 27.3 -33.41
Dendreon DNDN 39 15.63 15.00 -4.03
Human Genome Sciences HGS 825 75.00 69.31 -7.59
Icos ICOS 167 37.00 51.94 40.38
Idec Pharmaceuticals IPPM 473 181.81 189.56 4.26
Immunex IMNX 2795 39.75 40.62 2.19
ImmunoGen IMGN 132 33.00 21.44 -35.03
Insmed Pharmaceuticals INSM 65 11.88 3.62 -69.53
Millennium
Pharmaceuticals MLMN 704 64.00 61.88 -3.31
Neurocrine Biosciences BBIX 90 30.00 33.12 10.40
NPS Pharmaceuticals NPSP 168 42.00 48.00 14.29
Onyx Pharmaceuticals ONXX 45 15.00 14.88 -0.80
OSI Pharmaceuticals OSIP 375 70.00 80.12 14.46
Total Avg.%
for 4Q00 Change:
($M) 1.0
$6,561
4Q00 DEBT FINANCINGS
Company Ticker Symbol Value ($M)
Gilead Sciences GILD $250
Inhale Therapeutic Systems INHL 200
Abaxis ABAX 6
Total for4Q00
($M):$456
VCs Warm Back Up to Biotech
While VC interest in the Internet waned (along with much of the general
public), VC interest in biotech appeared to be back in 2000. Over
$2.8 billion of venture capital was infused into the industry, well over twice
1999's investment ($1.1 billion) and three times that of 1998 ($800 million).
"As we begin to see more biotech's with products on the market, we'll continue
to see VCs come back. We're also beginning to see more and more new
biotechnology focused VC funds being established. We're even seeing the likes
of CalPERS, the California Public Employees' Retirement System, one the
largest institutional investors in the world, show increased interest in the
space," said Burrill.
M&A and Alliances
With all the follow-on activity, merger and acquisition activity was
relatively quiet during the quarter, though several major deals were
completed, including:
-- Abbott Labs' $6.9 billion acquisition of the Knoll Pharmaceuticals
division of BASF to complement the product portfolio in several of
their core franchises, including metabolic diseases and pain
management;
-- Shire Pharmaceuticals' $4 billion acquisition of BioChem Pharma, which
broadened and enhanced Shire's current product portfolio of treatments
for ADHD and HIV; and
-- Corixa's $900 million acquisition of Coulter Pharmaceuticals , which
combined Corixa's antigen discovery and immunotherapeutic product
development expertise with Coulter's therapeutic antibodies and
targeted oncologics platforms.
Major acquisitions in the quarter included:
Aquirer Acquired Value
($US M)
Abbott Laboratories Knoll Pharmaceuticals,
(division of BASF AG) $6,900
Shire Pharmaceuticals (U.K.) BioChem Pharma (Canada) 4,000
Corixa Corp. Coulter Pharmaceuticals 900
Inhale Bradford Particle Design (U.K.) 200
Amgen Kinetix Pharmaceuticals 170
Affymetrix Neomorphic 119
Aurora BioSciences PanVera Corp. 86
Abgenix ImmGenics (Canadian) 77
Inhale Therapeutic Systems Quadrant Healthcare (U.K.) 60
BioTransplant Eligix 55
Incyte Proteome 77
Partnering/Alliance
Biotech/pharma alliances this quarter included:
Biotech Pharma Description Value
($US M)
Genzyme Purdue Joint development
Molecular Pharma of 20 cancer
Oncology antigens 321
Geneva
Proteomics Novartis Geneva will analyze
the proteomes of three
selected tissue or body
fluid types, elucidating
the role of proteins
in disease. 84
GeneLabs Watson Watson Pharmaceuticals
Technologies Pharma- acquired rights to
ceuticals market Genelab's Aslera.
in North America. 71
Avigen Bayer Bayer received
exclusive worldwide
rights to Avigen's
Coagulin B. 60
Karo Bio AB Aventis S.A. Aventis will gain
access to Karo's BioKey
high throughput
screening assays. 32
Targeted American Home Collaboration to
Genetics Products Corp. develop gene therapies
to treat hemophilia. 30
Zonagen American Home Collaboration to
Products Corp. develop a contraceptive
vaccine, using Zonagen's
antigen and adjuvant
technologies. 23
Axonyx Serono Serono completed its
acquisition of
exclusive worldwide
rights to Axonyx's
amyloid and prion
inhibitory peptides. 23
Other News of Note From the Quarter
Celera's Craig Venter was selected by Time Magazine as a "runner-up" to
Person of the Year, losing out to new U.S. President George W. Bush.
In December, The Department of Agriculture announced the final adoption of
the first standards that the federal government has ever imposed for the
labeling and processing of organic foods. The new standards, which were
ordered by Congress more than ten years ago and finally completed in 2000, ban
the use of irradiation, biotechnology and sewer-sludge fertilizer for any food
labeled organic.
Also in December, the Food and Drug Administration (FDA) proposed a new
format for prescription drug labeling that will help reduce medical errors,
which may be responsible for as many as 98,000 U.S. deaths annually. An FDA
study showed that practitioners found drug product labeling to be lengthy,
complex, and hard to use. The proposed new format would provide user-friendly
labeling that would allow practitioners to quickly find the most important
information about the product.
The Quarter's Product News
It was a busy year at the FDA: a total of 58 drugs were approved in 2000
(compared to 47 drugs in 1999), making it one of the best years for drugs
approvals by the FDA ever. Some of the more noteworthy approvals and FDA
activities during the final quarter of 2000 included:
-- The FDA approved Immunex's Novantrone as the first therapy for
secondary progressive multiple sclerosis. Novantrone has been on the
market since 1987 for the treatment of acute myelogeneous leukemia; in
1997, Immunex received approval to expand the label to include
treatment for pain associated with prostate cancer.
-- In October, the FDA approved Pharmacia's Lunelle(TM) Monthly
Contraceptive Injection, the first and only once-a-month contraceptive
option for women in the U.S. A combined hormonal injectable
contraceptive method, Lunelle(TM) has contraceptive benefits similar to
the pill yet offers women the convenience of once-a-month dosing.
-- In November, the FDA approved Glaxo Wellcomes' Trizivir, which combines
three anti-HIV medicines into one single tablet.
2001: Biotech's Challenging Odyssey
The next year for biotech will be an interesting and eventful one, full of
the challenges that have become the hallmarks the biotechnology industry.
On the negative side ...
-- Lock-up expirations will continue to have a negative effect on biotech
stock prices as the markets digest the flood of IPOs from 2000. The
forty-six IPOs in the second half of 2000 all will see their lock-ups
expire in the first half of 2001. Thirty-one companies' locked shares
will enter the market during the months of January and February 2001,
alone, compared with only three in the month of December 2000. Unless
a considerable demand exists for these shares, biotech stock prices are
likely to fall, at least for these companies.
-- GMOs, cloning, gene therapy, and stem cell research will continue to
make headlines and cause consternation with the general public, which,
in turn will effect biotech stock prices ... often in a negative way.
-- IP protection and patent battles will continue to be challenges in the
coming year. As we've already seen, these legal wranglings haven't had
a positive effect on the industry. The profusion of genomics companies
and their looming patent battles will continue to be challenges for the
industry, as many genomics companies patented genes without fully
understanding or knowing their function (knowing "utility" is key to
patent protection). Patents must be protected, no matter what the
cost. Recent disputes (like those between ACLARA and Caliper, Amgen
and Transkaryotic Therapies, and Affymetrix and Oxford Gene) have
distracted management's attention and resources away from company
building, stalling progress and innovation within the sector.
-- Valuations will be challenged. With the great appreciation in value in
2000, some "settling" may occur in 2001.
On the positive side ...
-- Biotech companies will continue to find new markets and new routes into
consumer markets. Biotechs with therapeutic products have
traditionally relied in part or wholly on partnerships with pharma for
marketing and sales. Future biotech products, not requiring pharma's
infrastructure for success, will adopt a direct-to-consumer (DTC)
model, the diagnostic/therapeutic linkage model, and generally find
more avenues to be more fully integrated. The old pharma "FIPCO"(Fully
Integrated Pharmaceutical Company) model will be effectively challenged
by biotech and the markets will be excited seeing an increased base of
these companies becoming profitable.
-- In spite of the recent downturn in the Dow and Nasdaq, 2001 will likely
see a return to double-digit percentage increases ... and biotech
indices will outperform both. During almost all of 2000, biotech stock
outperformed other technology stocks, along with Nasdaq, the Dow and
Russell 2000 indices. For 2000 the result were: Burrill Life Science
Composite up 24 percent, Burrill Biotech Select up 36 percent, Nasdaq
down 39 percent, DJIA down 6 percent, and the Russell 2000 down 4
percent.
-- Healthcare policy and drug pricing, hotly contested issues during the
recent Presidential election, will continue to make headlines in 2001.
But, on balance, it won't be as bad as many expect, and pharma/biotechs
will benefit from healthy returns for their staggering investment in
research.
-- Finally, as many biotechs mature, we'll begin to see more profitable
biotech companies with REAL products on the market and sales will be
better than expected. Many of biotech's past promises will be
fulfilled and this should reinvigorate investor interest.
On balance, 2001 will be a good-not great-year for biotech.
BIOTECH INDUSTRY FUNDRAISING
($ in Millions)
PUBLIC COMPANIES
IPO(1) Secondary Convertible Private Venture
Public Debt Capital
4Q00 $1,389 $7,349 $486 $1,068 $752
4Q99 343 3,417 257 774 349
3Q00 2,656 635 1,437 853 829
2000 6,490 12,651 5,728 4,061 2,872
1999 688 5,805 1,520 1,433 1,084
PRIVATE COS.
Other Financing Partnering Total
Total (2)
4Q00 $47 $11,091 $1,337 $12,428
4Q99 49 5,189 2,037 7,226
3Q00 69 6,479 2,302 8,781
2000 203 31,775 6,901 38,676
1999 184 10,717 5,290 15,517
(1) Includes over-allotments.
(2) Partnering figures based on disclosed transactions.
Burrill & Company
Burrill & Company is a private merchant bank, focused exclusively on life
science companies (biotechnology, pharmaceuticals, healthcare, related medical
technologies, agricultural technologies, animal health, nutraceuticals, and
bioprocess/biomaterials).
Venture Capital: The Burrill family of venture capital funds, with over
$250 million under management, includes the Burrill Biotechnology Capital
Fund, the Burrill Agbio Capital Fund, and the Burrill Life Sciences Capital
Fund, the Burrill Nutraceuticals Fund, and the Burrill Biomaterials/
Bioprocesses Capital Fund (under development).
Strategic Partnering: Burrill & Company assists life science companies to
identify, negotiate, and close strategic partnerships providing access to
resources, technologies, or collaborations essential for executing their
business plans. We have completed more than 20 strategic partnerships with a
value in excess of $1 billion.
Spin-outs/Spin-ins: Burrill & Company works with major life science
companies to spin-out internal assets and capitalize on their value. Spin-
outs range from the outright sale of products or businesses to creation of new
companies to develop these assets. Conversely, we use our extensive network
to help companies identify, assess, and capture ("spin-in") products and
companies strategic to building their businesses.
For more information, please visit Burrill & Company's website at
burrillandco.com.
SOURCE Burrill & Company
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