The San Diego life sciences community is closely watching the discussions in Washington, D.C., regarding health care and insurance. And, if recent stock market activity is any clue, there is reason for concern.
The Burrill Biotech Select Index, a portfolio of companies involved in life sciences, was down 10 percent in October compared to the Dow Jones Industrial Average, which was unchanged, and the Nasdaq composite index, which fell 3.6 percent.
San Diego-based Illumina was once of the hardest hit companies in the index, falling 24 percent. The shares fell $8.29 in late October to $33.37 after reporting third quarter results and 2009 guidance that were below analystsí expectations.
Illumina shares hit a multi-year high above $43 on Oct. 19 before selling off later in the month and closed Friday at $32.64.
"There wasn't a lot to cheer about for biotech companies in October," said Steven Burrill, CEO of a San Francisco venture capital and banking company. "The nervousness about the strength of the economic recovery combined with weaker or average financial results took its toll on biotech's top companies."
Unlike other industries where all companies tend to rise and fall together, biotech companies have a tendency to stand on their own merits.
For instance, Amylin Pharmaceuticals in the past week announced an agreement with Takeda Pharmaceutical of Japan to develop and commercialize products for the treatment of obesity, a health problem that affects at least 300 million people worldwide.
"Amylin recognizes the enormous potential of this collaboration to advance more options in obesity treatment more quickly than either company could do alone. Amylin and Takeda are excited about working together to address the significant unmet need for the millions of patients who need better solutions to manage obesity," said Amylin CEO Daniel Bradbury.
With more than 19 drugs in development, Isis Pharmaceuticals is focused on programs that treat cardiovascular, metabolic, neurodegenerative and cancer complications.
When reporting third quarter results last week, chief financial officer Lynne Parshall said, "We are projecting to end 2009 in the strongest financial position in our history, maintaining our momentum of strong fiscal performance with our second year of profitability. In addition to our financial success, we are performing in all other areas of our business."
Amylin and Isis are trading slightly off their best levels in October and have outperformed the overall industry.
One of the big challenges facing life science companies and the entire biotech and big pharma industries is the potential outcome of the health care debate.
"For elderly people who are eligible for Medicare and Medicaid, the bill mandates rebates from the drug makers so that the Medicare system ends up paying less. Those rebates are estimated to cost the industry $60 billion over a decade," said Burrill.
But, he acknowledges that are some elements in the legislation that actually work in the favor of the industry.
"The bill is in favor of allowing 12 years of data exclusivity for biotech drugs and that is good for our industry. With 25 to 50 million Americans added to the health care system, revenues for the health care industry should increase, so the bills are a mixed bag for pharma, med devices and biotechs," added Burrill.
But, at least one industry executive says it is time to repair what he calls "the engine of biopharma innovation."
John Lechieiter, CEO of Eli Lilly, spoke at the City Club of San Diego recently and challenged the industry to address the needs of the world.
"At a time when the world desperately needs more new medicines for everything from H1N1 to Alzheimer's disease, we're taking too long, spending too much and producing far too little. Repowering pharmaceutical innovation is an urgent need not only for our companies and our industry but for our nation and for communities like San Diego that have a huge stake in the life sciences," said Lechieiter.
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