Reinforcing the strong performance in the capital markets in the third quarter, the biotech industry raised almost $10 billion in financings and partnering, according to Burrill & Co.'s Quarterly Biotechnology Report, which tracks the ongoing performance of the biotechnology industry.
"During each successive quarter in 2005 we have seen a consistent increase in the total amount of financings that biotechs have raised," said G. Steven Burrill, CEO of Burrill, a San Francisco based life sciences firm with principal activities in venture capital, merchant banking and media. "Barring any unforeseen development that derails the industry in Q4, we are on track to break the $30 billion barrier once again and perhaps even break the impressive $30.8 billion that was raised last year."
Public biotech companies were able to generate almost $5 billion in financing in the third quarter compared to $2.5 billion that was raised in the second quarter of 2005, the report said. The $5 billion 3Q 05 total represents a whopping 131 percent increase over the $2.1 billion that was raised in the same quarter of 2004.
"It certainly was a stellar quarter as far as public financings were concerned," Burrill said. "In all financing categories, except for IPOs, the third quarter totals were considerably higher than both 2Q 05 and the comparable Q3 '04 totals."
"The market had an appetite for PIPEs, follow-on issues and debt -- with these instruments collectively generating $4.7 billion -- showing a decided investor interest in more mature biotech companies," Burrill added.
Burrill said despite the biotech industry's "sub-par" performance in September, including Burrill Biotech Select Index finishing the month in negative territory, he thought this past quarter was otherwise "excellent."
"The third quarter results show that the Burrill Biotech Select Index again beat both the Nasdaq and the Dow, and is well ahead of both these benchmarks on a year-to-date basis," Burrill said. "The over 15 percent gain since the beginning of the year, with most of this occurring in the second and third quarters, is a signal that investors are putting their faith in biotech stocks, which they have come to believe are much less sensitive to the prevailing market forces of rising interest rates, sky rocketing oil prices and the recent tragic combined economic effects of hurricanes Katrina and Rita." Burrill predicted the IPO window is beginning to open again also, given the "flurry" of activity that occurred to close out the quarter; this despite several large biotech companies pricing at the low end of their price range and closing the month below their issues price.
"We expect to see more biotech IPOs in Q4, particularly in the wake of the 260 percent increase in IPO financings over the amount raised by this route in Q2 05," Burrill said.
Looking at the performance of those biotech companies that completed IPOs since the "opening" of the window in 2003, the group is now collectively up 23 percent overall at the end of the third quarter, though over half are still trading well below their issue price.
"The Burrill Biotech 2003/4/5 IPO Index continues its steady improvement and although not fully above water as far as the year-to-date performance is concerned, we expect the Index to close the year in positive territory," said Burrill "It is this kind of continuing success of companies in the group, like Myogen, whose share price was up 236% for the quarter, that will contribute to an active IPO season for biotechs in Q4 with at least 10 companies currently on the IPO runway that could test the market."
While the amount of venture capital was down 11 percent compared to Q2 05, there were still more than 40 deals that got done, averaging about $20 million per investment. Year-to-date, the $2.55 billion raised is down 14 percent on the 2004 three quarters total.
Partnering deals in Q3 2005 were down approximately 10 percent compared with Q2 05 but up 22 percent over the comparable 2004 amount, according to the Burrill report.
"There has been no sign that big pharma is slowing down its partnering or acquisitions activities," Burrill said. "Typical of this trend is GlaxoSmithKline's acquisition of Vancouver-based ID Biomedical Corporation, developer and manufacturer of innovative vaccine products, including influenza vaccines," said Burrill.
"In the past, we might have seen GSK forge a strong alliance with ID Biomedical, which has vaccine manufacturing facilities in Canada and in the U.S., but now the pharma sees itself as a major player in the 'flu vaccine market and hence they were willing to pay $1.4 billion for ID Biomedical," he added.