Nice review of November by Burrill:
Press Release
Source: Burrill & Company
Biotech Shows Strength in November
Monday December 2, 6:00 am ET
Genomics and Small-Cap Indices Post Double-Digit Gains
SAN FRANCISCO, Dec. 2 /PRNewswire/ -- A flurry of positive data about employment, consumer spending and durable goods fueled a rally on Wall Street that extended throughout most of the month. The Burrill Biotech Select Index gained 8% during November, outperforming the DJIA, up 6%, but lagging slightly behind the NASDAQ, up 11%. "After months of skepticism, investor momentum changed and interest in biotech has rekindled," noted G. Steven Burrill, CEO of Burrill & Company, a San Francisco- based life sciences merchant bank. "Most investors believe that the market has bottomed and there is no where to go but up. This is particularly true for the genomics and the small cap biotech firms which have taken a beating on Wall Street all year long," he said.
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"But there is more to it than just having the market hit bottom," added
Burrill. "The tightening of the capital markets for biotech during 2002 forced the industry into survival mode. Companies have eliminated programs, cut staff, narrowed their focus, partnered up and down the value chain for more integration, made significant changes in management, and amended strategic business plans," he said. "CuraGen (CRGN) and Exelixis (EXEL), among others, have made cuts in early stage research and reduced headcount to stretch their resources. These are signs of maturation, not failure, and investors are again seeing biotech as a viable, sustainable, and a profitable industry," Burrill commented.
Indeed, the third quarter profits for biotech exceeded expectations with 14 biotech firms beating the Street's consensus and another four hitting their numbers. Only one, Genzyme (GENZ) fell short of what the Street anticipated. Still, November had its share of disappointments with Advanced Tissue (ATISQ) liquidating assets and releasing employees and Immune Response Corporation (IMNR) warning that it may have to file for bankruptcy. Genaissance Pharmaceuticals (GNSC), up 72% for the month, closing at $1 per share for the first time in more than a month, was facing delisting by NASDAQ before its turnaround.
The Burrill Small-Cap Biotech Index posted the largest gains for the month, up 15%. Leading the charge was Sangamo Biosciences (SGMO), which gained a whopping 144% in value during November, closing at $4.96 per share. While Sangamo is years away from having a product on the market, the company announced on November 19 that Edwards Lifesciencs Corporation (EW) was planning to develop and evaluate novel therapies for cardiovascular and vascular diseases based on Sangamo's zinc finger DNA binding protein transcription factors (ZFP TFs). The agreement between the two companies includes up to $3.5 million in R&D funding. Investors also liked the news coming from Onyx Pharmaceuticals (ONXX). On November 13, Onyx announced that BAY 43-9006, the company's novel anticancer investigational agent, is moving toward Phase III clinical trials. The company's value rose 82% for the month, closing at $6.88 a share. Neurobiological Technologies (NTII) also posted significant gains closing the month at $6.22 a share, up 79% for the month. The company reported a profitable first quarter -- its second over the last four quarters. Net income for the quarter was $56,000 due primarily from licensing payments from its Mematine compound for neuropathic pain. The company's second compound, XERECEPT(TM), a treatment for peritumoral brain edema, is approaching a pivotal Phase II/III trial as well.
The Burrill Genomics Index also showed signs of life gaining nearly 13% in value during November but still down 60% YTD. "Of all the segments within biotech, the genomics companies are the most undervalued," explained Burrill. "No big surprise that investors jumped on the positive news coming out of Millennium (MLNM), CuraGen (CRGN), Lynx (LYNX), and Celera (CRA)," he said.
Millennium, up 35% for the month, started a Phase III 6,000 patient clinical trial to evaluate whether the anticlotting medication, Integrilin, improves the survival rate of heart attack patients and reduces the rate of congestive heart failure. The company also announced the start of a Phase I clinical trials for MLN2704 in patients with matastic androgen-independent prostate cancer. CuraGen, up 41% for the month, seduced investors with its proactive reductions in staff and spending to support its migration from a discovery orientation to one that embraces product development. Having identified 500 targets and with 200 programs underway, CuraGen is now ready to capitalize on the product development gap that is plaguing big pharma.
Lynx Therapeutics, up 46% during November, announced the successful completion of initial MPSS(TM) gene expression analyses for the Ludwig Institute for Cancer Research on November 12, and on the following day, the company reported that it had cut its operating loss to $2.1 million in the third quarter of 2002 (from $4.9 million in the second quarter of the year) with revenues of $4.8 for the quarter. Celera, up 37% for the month, issued an optimistic press release about its first quarter fiscal 2003 results. Although the company's revenues decreased to $23.6 million from $27.3 million for the same quarter in fiscal 2002, the emphasis was on the company's forward movement in the area of drug discovery. Celera has recently purchased a number of pre-clinical oral typtase inhibitors for the treatment of asthma from Bayer AG and also is pursuing a program to develop oral and/or parenteral inhibitors of factor VIIa for anticoagulation indications. Celera Diagnostics, a 50/50 joint venture between Applied Biosystems (ABI) and Celera Genomics, reported sales of $3.9 million, a 63% increase over the $2.4 million in the comparable year-earlier period. In addition, Celera Diagnostics announced a new breast cancer research initiative with the University of California, San Francisco that will focus on the development of new diagnostics tools for earlier detection of the disease.
The Burrill Large-Cap Biotech Index rose 9% during November with only two companies within the index -- Genentech (DNA) and Vertex (VRTX) -- showing slight losses with shares down 3% and 5%, respectively. The big gainers were Millennium, ICOS (ICOS), Biogen (BGEN), and Genzyme -- up 35%, 29%, 21%, and 13%, respectively. "Investors flocked to the bigger companies with depressed values while largely ignoring the number one player, Amgen (AMGN) which saw only a modest 1% gain," noted Burrill.
The Burrill Mid-Cap Biotech Index gained 8% during November with Neose Technologies (NTEC) and Exelixis (EXEL) gaining 88% and 83%, respectively. "Investors have been impressed with the big company alliances these two companies have been signing," commented Burrill. "Shares of Exelixis shot up almost 50% on last month's news of a collaboration with GlaxoSmithKline (GSK) and they kept on climbing all month augmented by the company's November 7 announcement of a better than expected full-year 2002 revenue forecast of a 5 to 8% increase over 2001," he continued.
Neose Technologies signed a second R&D collaboration with Novo Nordisk (NVO) at the end of October focused on the use of Neose's GlycoPEGylation technology to make potentially clinically significant improvements to a Novo Nordisk therapeutic protein. Less than one month later, the company entered into a research agreement to enhance the glycosylation of therapeutic monoclonal antibodies produced in plants with Monsanto Protein Technologies, a unit of Monsanto (MON). "Investors clearly see this kind of high level endorsement as a plus," noted Burrill.
News on the clinical trials and product approvals front was largely positive, both for biotech and for big pharma. On November 14, the FDA approved a label change for Biogen's key multiple-sclerosis drug, Avonex, lowering the rate of occurrence of neutralizing antibodies to 5% from the original label rate of 24%. On November 15, a small biotech company, SuperGen (SUPG), received US regulatory approval for its version of a generic drug to treat stomach and pancreas cancers called Mitozytrex. Earlier in the month (November 11), the FDA granted fast-track designation to SuperGen's NDA for Orathecin, an oral treatment for pancreatic cancer. SuperGen's stock, which opened at $2.84 a share at the start of November, closed at $4.60.
On November 21, the FDA cleared the IDI-Step B test -- jointly developed by Cepheid (CPHD) and its partner, Infectio Diagnostic -- for commercialization in the US. The test, which runs on Cepheid's Smart Cycler instrument, detects the presence of Group B Streptococcus in pregnant women at the time they enter labor and delivery. On November 26, the agency approved BioSphere's (BSMD) Embosphere Microspheres product for use in the elimination of uterine tumors. Shares of the company's stock jumped 45% on the day of the news and ended the month at $6.85.
The Burrill Nutraceuticals Index jumped 12% during November fueled in large measure by Martek Biosciences' (MATK) 47% gain in share value. An American Heart Association report, released in November, showed that when children with elevated blood lipid levels supplemented a specialized diet with docosahexaenoic acid, or DHA, they showed greater flexibility in their arteries than with the diet alone. The DHA used in the study was Martek's vegetarian, contaminant-free form of the omega-3 fatty acid. The report also concluded that healthy people should eat omega-3 fatty acids to protect their heart. Another study that appeared in the November 6 issue of the Journal of the National Cancer Institute reported that men who eat onions and garlic had a 50 percent lower risk of having prostate cancer than those who didn't eat them. "We're seeing more and more clinical proof of the benefits of various nutrients. This is precisely what the nutraceuticals industry needs to be taken more seriously by the investment community," Burrill commented.
Both the Biomaterials/Bioprocess Index and the Agbio Index also held their own during November with values increasing by 4% and 3% respectively. "There is still some confusion and reluctance surrounding the use of transgenic crops to produce therapeutic proteins and industrial enzymes," noted Burrill. "The USDA's recent discovery of a co-mingling of food crops and those intended for pharmaceutical or industrial use exacerbated existing concerns and brought the issue to a head in November," he said. "The Biotechnology Industry Organization (BIO) is trying to strike a compromise between its bio-pharming members and the food industry by establishing a transgenics-free zone in the major corn-producing states of Iowa, Illinois, Indiana, and in portions of Nebraska and five other states. While the food industry is crying out for a stricter agenda allowing only non-food crops for transgenics, biopharming proponents are angry about the limitations -- particularly as corn is the most favored crop for producing therapeutic proteins and monoclonal antibodies ... and these states don't want to lose out on the potential bounty," Burrill added.
A review of the Burrill Life Sciences Indices for November 2002 is as follows:
Percent Percent
Index 12/31/01 10/31/02 11/29/02 Change for Change
Value Value Value Month YTD
Burrill Biotech
Select Index 313.32 162.51 175.31 7.88% -44.05%
Burrill LARGE-CAP
Biotech Index 317.87 197.59 215.83 9.23% -32.10%
Burrill MID-CAP
Biotech Index 232.91 120.98 130.99 8.27% -43.76%
Burrill SMALL-CAP
Biotech Index 174.65 81.00 92.77 14.53% -46.88%
Burrill Agbio
Index 75.69 68.19 70.36 3.18% -7.05%
Burrill Genomics
Index 253.49 90.36 101.89 12.77% -59.80%
Burrill Biomaterials/
Bioprocess Index 109.34 79.03 82.13 3.93% -24.88%
Burrill Diagnostic
Index 84.92 67.97 64.76 -4.73% -23.74%
Burrill Nutraceuticals
Index 127.62 115.49 129.26 11.93% 1.29%
Burrill Life Science
Composite Index 167.40 109.23 119.10 9.03% -28.85%
Percent Percent
Index 12/31/01 10/31/02 11/29/02 Change for Change
Value Value Value Month YTD
Burrill Biotech
Select Index 313.32 162.51 175.31 7.88% -44.05%
NASDAQ 1950.42 1329.75 1478.78 11.21% -24.18%
DJIA 10021.57 8397.03 8896.09 5.94% -11.23%
Russell 2000 488.50 373.50 406.36 8.80% -16.81%
AMEX Biotech Index 580.58 345.8 369.3 6.80% -36.40
Burrill & Company
Burrill & Company is a life sciences merchant bank, focused exclusively on companies involved in biotechnology, pharmaceuticals, diagnostics, human healthcare and related medical technologies, agricultural technologies, nutraceuticals, and biomaterials/ bioprocesses.
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The Burrill family of venture capital funds, with over $400 million under management, includes the Burrill Biotechnology Capital Fund and its successor -- the Burrill Biotechnology Capital Fund II (under development), the Burrill Diagnostics Fund, the Burrill Agbio Capital Fund and its successor -- the Burrill Agbio Capital Fund II, the Burrill Nutraceuticals Capital Fund, the Burrill Biomaterials/Bioprocess Capital Fund and the Burrill Life Sciences Capital Fund.
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I suspect we'll get some substantial strength today from AMGN.
Peter |
