Biotech indexes mixed during first quarter after quick start, slower finish

By Jennifer Chiou

New York, April 3 - The biotechnology industry closed out a rough month of March but it didn't dampen the performance of mid- and small-cap biotech companies, according to a news release from biotechnology bank Burrill & Co.

Although the Burrill Mid-Cap Biotech index dropped almost 5% in March, it closed out the quarter with a gain of 24.5%, the release noted, adding that the Burrill Small-Cap Biotech Index, which was up 2.5% in March, finished up 26.6% for the first quarter.

However, the Burrill Biotech Select index, down 4.5% for the month, came out ahead only 0.5% for the quarter, according to the release.

The Nasdaq Biotechnology index finished March up 2.5% and 6% better for the quarter, while the Dow Jones Biotechnology index was up 1% for month and 3.6% for the quarter.

"There were some very impressive gains in the emerging and growing biotech sector during the quarter," Burrill & Co. chief executive officer G. Steven Burrill said in the release.

"There has been a renewed investor interest in these companies, which seems to be, for the present time, at the expense of biotech's blue-chip companies.

"These bellwether, large-cap biotech stocks did not carry over their momentum from a stellar 2005 into the first quarter of 2006 even in the wake of a late March market rally thanks to a general optimism about U.S. economic growth and business spending.

"Contributing to the large cap biotech companies' sluggishness on the markets was several product disappointments. Cephalon Inc., for example, had its Sparlon drug, an experimental treatment for attention deficit hyperactivity disorder in children, rejected by the FDA.

"The agency also pushed the action date on Biogen Idec and Elan's multiple sclerosis drug Tysabri back by three months to late June in order to have more time to review the companies' drug risk-management plans," Burrill added in the release.

The release said that biotech companies netted $9.1 billion in financing in the first quarter, which represents more than 50% of the total financings raised during the full year 2005.

The surge was due in part to Amgen's $5 billion convertible offering during the quarter.

"While the capital markets were still a little choppy for biotechs, particularly in March, investors were showing their continued interest," Burrill said in the release.

"PIPES were a hot commodity in Q1 '06, reinforcing the fact that private investors believe that biotech companies are substantially undervalued. The $1 billion raised from approximately 50 deals in the quarter was up 100% from the previous quarter."

Biotech entities raised $303 million in six U.S. IPOs during the quarter, compared to $168 million in the fourth quarter of 2005 by four companies.

Altus Pharmaceuticals Inc. sold 7 million shares for $105 million in its IPO that priced in the middle of its expected range.

Altus, which was spun out of Vertex Pharmaceuticals Inc. in 1999, uses a proprietary protein crystallization technology to develop new protein drugs, the release noted, adding that its lead product is an enzyme replacement therapy for the treatment of malabsorption as a result of exocrine pancreatic insufficiency.

At the close of the month, Altus was priced at $21.93, a gain of 46% from its IPO price of $15.00, the release stated.

In February, SGX Pharmaceuticals Inc. took in $25 million for its IPO while Valera Pharmaceuticals Inc., Iomai Corp. and Acordia Therapeutics netted $35 million, $35 million and $36 million, respectively.

During the first quarter of 2006, the release said, $734 million was raised in 41 venture financings, 23% lower than the total raised in the fourth quarter of 2005.

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