The biotech industry has followed in close step with the surging capital markets so far this year, and by close of trading
business at the end of February, the Burrill Biotech Select Index was up 3.6 %, year-to-date. For the same period, the Dow
Jones Industrial average was up 5.6 % and the Nasdaq Composite index was up almost 5 %.
G. Steven Burrill (DIGITAL VISION/GETTY IMAGES)
The industry got off on the right foot with a generally upbeat mood pervading the annual JPMorgan Healthcare Conference in
San Francisco in early January, reflecting the fact that many biotech and pharma CEOs in attendance felt that 2011 would be
a good year for their companies.
There was also a general consensus at the meeting that biotech mergers and acquisitions activity would increase significantly
as a result of larger biotechnology and Big Pharma companies looking to bolster their product pipelines and catalyze growth.
We certainly didn't have to wait too long to see this scenario begin to unfold. In late January, Amgen announced that it would
pay $1 billion to acquire BioVex, a privately held biotechnology company based in Woburn, Massachusetts, with additional operations
in Abingdon, United Kingdom. The transaction provides Amgen with BioVex's lead product candidate, OncoVEXGM-CSF, an investigational
oncolytic vaccine currently in phase III clinical development as a treatment for metastatic melanoma. A phase III multinational
study in head and neck cancer is also ongoing.
Biotech's second largest company by market cap, Gilead Sciences, also announced an acquisition, saying that it will pay $375
million cash to acquire privately-held Calistoga Pharmaceuticals, a company focused on cancer and inflammatory diseases. Factoring
in potential milestones, the total deal could be worth around $600 million. Commenting on the rationale for the deal, Gilead
said that it serves to further broaden their pipeline and expertise in the areas of oncology and inflammation.
In February, sanofi-aventis and Genzyme finally reached an agreement approximately seven months after sanofi made its initial
offer of $69 per share to acquire Genzyme. In the end, sanofi agreed to pay $74 per share in cash, and give each Genzyme shareholder
one contingent value right for each share they own, which will entitle them to additional cash payments tied to specified
milestones related to Genzyme's Lemtrada, Cerezyme, and Fabrazyme drugs, according to the released terms of the deal. The
final closing of this deal caused a surge of investor interest in the sector and fueled speculation about other "blue-chip"
biotech companies that could be in the crosshairs of Big Pharma companies.
Another transaction of note was Novartis' acquisition of San Diego-based diagnostics company Genoptix for $470 million. Genoptix
is focused on delivering personalized and comprehensive diagnostic services to community-based hematologists and oncologists.
Table I: Performance of Biotech IPOs completed in 2010.
We have seen plenty of deals like this in the personalized medicine space during the previous 12 months. As described in the
just released 25th anniversary issue of the annual report on the industry, Biotech 2011*, this sector is attracting a great deal of attention. This is because we are rapidly moving to a world that embraces not
only the possibility of using a person's genetic information to identify their risks for disease, but also being able to construct
individualized strategies for prevention or treatment through the use of biomarkers, molecular diagnostics and targeted therapeutics.
Not surprisingly, companies in the healthcare sector are positioning themselves for this evolving trend. A November 2010 study
by the Tufts Center for the Study of Drug Development reported that personalized medicine is occupying a growing role in the
clinical pipelines of drug developers and causing companies to change their research and development paradigms as a result.
Table II: February Burrill indices.
Not only are we seeing the impact that the field of personalized medicine is having on drug development, but also that it
is part of a wider discussion on how these evolving technologies will have a direct impact on helping to bring healthcare
costs under control. To drive healthcare costs down, we need to focus on encouraging wellness rather than simply treating
sickness. Interestingly enough, personalized medicine is moving to a "participatory" phase as people become much more involved
in decisions about their own healthcare. Driving this trend is the fact that healthcare is being impacted by the convergence
of information technology, wireless technology, and the proliferation of mobile devices. WiFi-enabled devices are allowing
patients to connect with their physicians remotely. Smartphones are becoming personal healthcare assistants capable of collecting
and transmitting vital body signs for analysis and subsequent results. This "digital health" world is just evolving and will
bring about a radical change in how medicine is practiced in the next decade.
BIOTECH INITIAL PUBLIC OFFERINGS (IP0S)
Several biotech companies made their US market debut in February. With the exception of renewable fuels and chemical developer
Gevo, all other biotech companies had to significantly lower their pricing expectations to get IPO deals done. The average
aftermarket performance of the biotech IPOs at the end of February was 8.6 %.
* Biotech 2011–Life Sciences: Looking Back to See Ahead is G. Steven Burrill's 25th annual publication on the state of the
biotechnology industry. This special anniversary edition examines how the industry has developed into the global enterprise
it is today. It describes what companies will need to do in order to remain competitive in a world being reshaped by technology,
globalization and emerging markets. In addition, it provides comprehensive analysis on the global industry's performance in
G. Steven Burrill is chief executive officer at Burrill & Company, San Francisco, CA, 415.591.5400, email@example.com