Biotech Shows Glimmer of an Upward Trend

Although the markets closed on a positive note in May, it will still take many more months before biotech starts on the road to full recovery.
Jul 01, 2009
Volume 22, Issue 7

G. Steven Burrill
The markets closed out May in positive territory following their April performance, which was their best month in nine years. The Dow Jones industrial average posted its third straight monthly gain, closing up 4%, with the NASDAQ close behind—up 3.3% in May. This positive market trend helped biotech; the Burrill Biotech Select index posted a modest monthly gain of 0.4%.

Vaulting Cougar Biotechnology's share value by 33% in May was the news that Johnson & Johnson (J&J) bid approximately $970 million in cash to acquire the company and gain access to compounds in development for the treatment of prostate cancer, breast cancer, and multiple myeloma. Cougar Biotechnology is currently conducting two Phase 3 trials for abiraterone acetate, a late-stage, first-in-class compound for the treatment of prostate cancer.

The predicted land grab of biotech by Big Pharma because of biotechs' depressed values has not yet panned out as pharmaceutical companies acquire each other instead. We may now see an upswing in merger and acquisition activity heading into the summer months, however, because the J&J acquisition of Cougar may prompt pharmaceutical companies, who have been generally been sitting on the sidelines, to "pull the trigger" on biotech deals so that they don't lose out to their competitors.

Shares of Dendreon have increased in value by a whopping 440% since the company first announced it had positive Phase 3 data showing that its lead product, Provenge, extended the lives of men with advanced prostate cancer by an average of 4.1 months. According to analysts, Dendreon should be able to file for regulatory approval during the fourth quarter of 2009. On the basis of its positive clinical data and strengthening share price, the company raised $221 million, the second best biotech financing deal so far this year, to help fund the manufacture and sale of Provenge.

Although the industry overall is still going through tough times and it probably will take many more months before biotech starts on the road to full recovery, it is encouraging to see that investors are prepared to reward biotech companies that achieve significant milestones.

Moreover, despite the prevailing economic recession and travel restrictions some countries imposed because of the H1N1 flu outbreak, the 2009 BIO International Convention, held in May, attracted well over 14,000 attendees to Atlanta, Georgia. The success of the meeting demonstrates that business is still ongoing and companies are actively looking for strategies and partners to help them get through the challenges they are currently facing.


The first quarter 2009 (Q1 '09) financial results from biotech's elite companies did not inspire investor confidence and confirmed that the worldwide economic crisis is taking a tougher-than-expected toll on drug sales.

Amgen reported lower-than-expected Q1 earnings as sales of virtually all of its key drugs fell well short of Wall Street estimates and the company lowered its 2009 revenue forecast, blaming deterioration in the global economy. The company's shares closed down 2% in April. Other companies followed suit. Genzyme's shares dipped 10% in April. Shares of Biogen fell almost 8% on weaker-than-expected first-quarter sales, although its per-share earnings beat Wall Street estimates. Celgene beat lowered first-quarter earnings expectations on weak sales of its cancer drugs but blamed its first-quarter financial shortfall on weakening demand for its cancer drugs, including Revlimid.

Our prediction that biotech would face tough times during 2009 and into 2010 is unfortunately playing out as financing and investor support remain in short supply.

Our monthly Burrill Report ( provides ongoing statistics and analysis on the 343 biotech companies that are publicly traded on major US markets. According to the report, at the end of May this group of companies had an aggregate market cap of $297.6 billion (up 3.6 % for the month). Other key findings in the report include:

  • There are 43 companies that have market caps greater than $1 billion.
  • 154 public biotechnology companies (44%) have a market cap below $100 million.
  • 69 are trading below their cash level.
  • More than 110 companies have announced corporate restructuring, slashing staff and putting promising projects on hold.
  • Year-to-date (YTD), the Burrill Biotech Select Index has fallen by 7%.
  • The performance of the top five biotech companies since the beginning of the year is as follows: Amgen (–13.8%); Gilead Sciences (–16.5%); Celgene (–24%); Genzyme (–11%); and Biogen (+ 8.6%).

It is not just biotech that is feeling the pain of the economic downturn. IMS Health has reported that it now expects the global pharmaceutical market to grow by an anemic 2.5% to 3.5% in 2009, down two percentage points from the forecast it issued six months earlier, and the lowest growth rate in at least 25 years.

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