G. Steven Burrill
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The past four months have been tough. Investors have been shell shocked in the wake of not only surging oil prices (compounded
by the declining dollar) and the housing slump, but also near chaos in the financial markets as Wall Street almost imploded
in the wake of a massive global liquidity crisis. The biotech industry, however, has come through this turbulent period relatively
unscathed, with the Burrill Biotech Select Index, a price-weighted index tracking 20 of biotech's "blue chip" companies, finishing
unchanged compared to the Dow, which closed down 3% and the NASDAQ, whose value dropped 9% in this period.
Companies with broader-based product portfolios have so far been able to ride out uncertain markets. Interestingly enough,
investors have been choosing biotech's elite companies over Big Pharma companies in this tough economic climate. This is reflected
in the fact that the Amex Pharmaceutical Index is down 11% since the beginning of the year. Although biotech's elite companies
have so far weathered the market downturn, emerging companies have been less fortunate because they are perceived by investors
as more risky. The Burrill Mid-Cap Biotech Index, for example, has dropped more than 21% since the beginning of the year and
the Burrill Small Cap Biotech Index dropped 18% in April.
BIOTECH IPOs ON HOLD
The prevailing tough economic environment also took its toll on biotech IPO hopefuls; Biolex, Light Sciences Oncology, and
Archemix all cancelled their planned offerings because of the market conditions. Only one company braved the market—Bioheart,
a biotechnology company focused on using autologous cells to treat heart damage. It priced its revised offering of 1.1 million
shares at $5.25; the company had originally filed for an offering of 3.6 million shares at a range of $14–$16.
Several companies, however, did file for an IPO in order to get in line and be ready to respond rapidly to complete their
IPOs when the market improves. Examples include:
- Bayhill Therapeutics, a clinical-stage biopharmaceutical company developing products to treat autoimmune diseases
- CyDex Pharmaceuticals, a specialty pharmaceutical company developing and commercializing drugs specifically designed to address
the limitations of current therapies in selected established markets
- Omeros, which is developing drugs to treat focused inflammation and disorders of the central nervous system
- Zogenix, which is developing treatments for central nervous system disorders and pain.
With only one biotech IPO completed since the beginning of the year and none in April, the window for biotech, while remaining
open, is not finding any companies ready to go through it right now. The first half of this year will continue to be dominated
by macroeconomic factors such as inflation, recession, and credit market turmoil. In the second half of the year, conditions
will improve and we will see biotech offerings re-emerging.
MARKET CAP
Table 1. Biotech indices through April 2008 ($M). Biotech's elites are weathering the market downturn, with the Burrill Biotech
Select unchanged, but the situation is tougher for emerging companies, with the mid-cap and small-cap indices down.
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The industry's market cap closed at $446 billion, virtually unchanged for April and down about 1.4% since the start of the
year. Genentech's market cap closed the month at $71.8 billion; Gilead Sciences was at $48 billion, and Amgen remained in
third place at $45.5 billion.
