The biotech sector nationwide posted solid gains in one of its best months this year in September, according to a study by Burrill & Co. The industry posted a 6 percent gain, ahead of both the Nasdaq and the Dow.
"With the Fed keeping rates unchanged and the Dow Jones flirting with an all-time high before falling just short at months end, investors were in an optimistic mood. And biotech didn't disappoint," said G. Steven Burrill, chief executive officer of Burrill & Co., a San Francisco-based company whose principal activities are in venture capital, merchant banking and media.
“With biotech-biotech acquisitions, partnership deals up 133 percent over the [second quarter] deals, venture capital flowing and Amgen and Genentech receiving regulatory approval for lead products, it was a better month for biotech stocks.”
Biotech was going through a “rough patch” earlier in the year, Burrill said, but the sector appears to have recovered. "The only damper on an otherwise excellent third quarter was that fundraising among biotech's companies was down considerably,” he said.
In 2006, biotech companies have already raised 20 percent more capital than in the whole of 2005. In addition, partnerships and M&As continue to accelerate, driven by big pharma's need to not only improve pipelines but add technologies as well, Burrill said. Biotech is potentially on its way to a record-setting $40 billion year from financing and partnerships.
San Diego companies faired well like others around the country. The UK's National Institute for Health and Clinical Excellence recommended that San Diego-based Genentech's and Roche's cancer drug Rituxan be used to treat newly-diagnosed patients with advanced follicular lymphoma. Previously the agency had recommended that the drug only be used on patients who had failed other treatments. Genentech's shares closed the month unchanged at $71.53, a 1 percent increase in the third quarter.
Amgen's shares jumped 5 percent in September as a result of the FDA approving Vectibix, a fully human monoclonal anti-EGF targeting colorectal cancer, which Amgen obtained following its acquisition of Abgenix. The company expects sales to begin in October, and to cost as much as 20 percent less than competing drugs.
Deal making took off in the latter quarters of the year, Burrill said, which is a sign of a stimulated economy.
"Deal making woke up again in Q3 06 after taking a breather in Q2 06,” said Burrill. "In fact, during the quarter, partnering activity was the major driver of financing activity in what was a generally lackluster quarter for raising capital.”
Headlining the over 30 deals was GlaxoSmithKline's strategic alliance with ChemoCentryx Inc. to discover, develop and market novel medicines targeting four chemokine and chemoattractant receptors for the treatment of a variety of inflammatory disorders, including Traficet-EN in late stage development for the treatment of inflammatory bowel disease. ChemoCentryx received an upfront payment of $63.5 million. In addition, the company will receive research funding and will be eligible to earn milestone payments up to, potentially, $1.5 billion, assuming successful development and commercialization of the products under development.
Biotech venture capital experienced a billion dollar quarter, though the $1.1 billion raised was 18 percent down from the previous Q2 06 period, the total raised in 2006 is already close to that raised in all of 2005. Headlining the over 40 venture capital deals in the third quarter was Esprit Pharma, a company focusing on the urology and women's health care specialty markets, which completed a Series B round, raising $90,790,000.
One area still struggling, according to Burrill, is IPOs. Only two biotech firms managed to launch IPOs during the quarter – Osiris Therapeutics and Cleveland BioLabs -- and the $49 million raised from these transactions was down 72 percent from the Q2 06 total.