Biotech Financing Window Closes Amid a Market Downturn

Sequencing the Human Genome Not Enough



Apr 02, 2001, 01:00 ET from Burrill & Company

    SAN FRANCISCO, Calif., April 2 /PRNewswire/ -- Following the year
 2000, the most phenomenal year ever for biotech with the industry raising
 $32 billion during the year and $7.3 billion in the first quarter of
 2000, year 2001 started at the opposite end, the least productive financing
 quarter for biotech in the last 8 quarters.  "With the biotech markets indices
 off 15 to 25 percent for the month and down as much as 80 percent from their
 mid 2000 high, investors waited by the sidelines watching the Dow and Nasdaq
 drive markets lower all quarter," said G. Steven Burrill, CEO of
 Burrill & Company.  The March 2001 quarter end reflected an industry market
 capitalization of $330 billion, down from its spring 2000 high of
 $500+ billion.  Investor enthusiasm for genomics following the spectacular
 announcement this quarter (February 12th) of the completion and the
 publication of the human genome sequence still couldn't stem the tide, as
 investors looked for liquidity and the highest of investment quality.
     "Financings totaled nearly $2 billion for the quarter, still an amazing
 amount of funding for our industry, which raised only $5 billion/year in
 '96, '97 and '98.  With the bar raised to $10 billion in '99 and $32 billion
 in 2000, it looks like a bad quarter," commented Burrill.  "But at a time when
 most think the equity market is dead, the industry still raised $2 billion."
 
     Financings
     Financings were off dramatically for the quarter.  Only 3 companies went
 public this quarter (raising $187 million versus $1.1 billion the same quarter
 last year):
 
                                                                       Market
                                           Amount  Price at            Cap at
                                 Offering  Raised   Qtr End           Qtr End
     Company          IPO Date    Price    (in $M) (3/30/01)  %Change (in $M)
 
     Exact Sciences
      Corporation
      (EXAS)          1/31/01      $14      $56.0    $7.62    -45.6     $143
 
     Third Wave
      Technologies
      (TWTI)           2/9/01      $11      $82.5    $7.00    -36.4     $274
 
     Seattle
      Genetics
      (SGEN)           3/7/01       $7      $49.0    $5.00    -28.6     $146
 
     SUMMARY           3 IPOs      Avg.     Total              Avg.
                                   Offr.    Raised:              %.
                                  Price:    $187.5            Change:
                                  $10.67                      -36.9
 
 
     The number of secondaries was also down significantly in the first quarter
 of 2001 compared to fourth quarter 2000:  only $711 million was raised in
 follow-on activity this quarter, compared to first quarter of 2000's follow-on
 activity of $7.3 billion, biotech's biggest ever.  "A slowing economy and
 falling markets created an unreceptive environment for such deals to take
 place," commented Burrill.
 
     First quarter 2001 secondaries included:
 
                                    AMOUNT
                                    RAISED
                         TICKER     (in $US    PRICE AT     PRICE AT        %
     COMPANY             SYMBOL    Millions)   SECONDARY     3/30/01    CHANGE
 
     Aviron               AVIR         200       $50         $41.56     -16.9
 
     Charles River
      Laboratories *       CRL        86.5       $19         $24.75      30.3
 
     Praecis
      Pharmaceuticals *   PRCS       186.4     $24.6         $19.94     -18.9
 
     Regeneron
      Pharmaceuticals     REGN       162.5       $25         $22.19     -11.2
 
                        TOTAL FOR
                         Q1 01
                         ($M)       $635.4
 
     * includes over-allotments
 
     M&A and Alliances
     "Traditionally when markets are tight and investors tentative, M&A picks
 up," commented Burrill.  "This quarter's blockbuster headline was Johnson
 & Johnson's $10.5 billion acquisition of ALZA, the biotech industry's biggest
 ever."  ALZA will provide J&J with a significant number of revenue generating
 drugs and drug delivery systems applicable to current J&J products.  J&J rival
 Abbott Laboratories attempted to acquire ALZA in 1999 for $7.3 billion, but
 was derailed due to antitrust concerns.
 
     A summary of the major M&A in the quarter included:
                                                                      Value
             Aquirer                    Acquired                ($US Millions)
 
     Johnson & Johnson                   ALZA                        $10,500
     ArQule                              Camitro                          95
     Charles River Laboratories          Primedica                        52
     Bio-Technology General              Myelos                           35
     Ilex Oncology                       Symphar                          30
 
     "While alliances also see upticks during periods of market uncertainty,
 it's too early to see that much activity," commented Burrill.
 
     Selected biotech/pharma alliances this quarter included:
 
                                                                        Value
      Biotech         Pharma                  Description               ($US
                                                                     Millions)
     CuraGen           Bayer           15 year obesity and diabetes    $1,340
                                       agreement expected to yield
                                       12 candidates for clinical
                                       development.
     Millennium        Abbott          The companies will develop      250
                       Laborat         diagnostics for obesity
                       -ories          and diabetes
     CuraGen           Bayer           Curagen will use its            124
                                       pharmaco-genomics and
                                       toxicogenomic technologies
                                       to evaluate Bayer's early
                                       -stage compounds
 
     EpiGenesis        Taisho          Epigenesis licensed EPI-2010    100
      Pharmaceuticals  Pharmaceuticals Asia rights to Taisho, in
                                       return for payment and co-
                                       development
 
 
     MorphoSys         Johnson         Morphosys technologies will     21
                       & Johnson       be used to generate Abs and
                                       perform target discovery for
                                       J&J subsidiary Centocor
 
 
     The Quarter's Product News
     -- Immunex halted trials of its rheumatoid arthritis drug, Enbrel, for the
 treatment of congestive heart failure, after the drug wasn't shown to be
 effective against the disease.
     -- Applera Corp.'s Applied Biosystems warned of slower mid-term growth.
 The Company blamed a slowdown in purchases of their highest-priced items, a
 stronger dollar weakening foreign sales and a slow down of manufacturing and
 sale of products currently undergoing life-cycle changes.  Applied Biosystems
 stock (ABI) lost almost 50 percent of its value in a day.
 
     THE BIG STORY
     Of course, the biggest story of the quarter was the sequencing and
 publishing of the human genome.  "A thousand years from now when looking back
 over the millennia, this moment in time will standout as one of those
 transforming moments when we first fully understood the human genome and the
 benefits to human healthcare, wellness, agriculture, biomaterials and the
 environment," commented G. Steven Burrill.
     Celera and the Human Genome Project published the results of sequencing
 the human genome in the March issues of scientific journals Science and
 Nature, respectively.  Upon further analysis, both camps agreed there are far
 fewer genes than was previously predicted, estimating the number to now be
 around 30,000 rather than 100,000 as was once thought.  Critics and companies
 who base their business models on the larger number, quickly pointed out that
 a small number of genes, as defined by the new guidelines, can still account
 for the previously estimated number of proteins, because one gene can code for
 more than one transcript/protein.
     Genome sequencing is continuing and resulted in the completion and
 announcement of many key organisms.  Celera announced completion of the mouse
 genome, an animal widely used in drug research.  Infectious agent E. coli
 O157, often termed the "burger bug," had its genome completed.  Researchers
 hope a better understanding of this troublesome pathogen will facilitate the
 development of better diagnostics that will detect its presence in the food
 supply.
 
     Other News of Note
     Stem cell research took center stage as President George W. Bush declared
 he was against federal funding of research on fetal tissue or stem cells
 derived from induced abortions.  But Bush reiterated his support of scientific
 progress by stating his support for adult-derived stem cells and stem cells
 taken from fetuses that died of natural causes.  This "battle" between
 science/industry and abortion opponents is still raging.
     Amgen won their patent litigation with Transkaryotic Therapies over
 erythopoietin.  Judge William Young ruled that despite differing production
 technologies, Transkaryotic Therapies did not show their invention was
 different from Amgen.  This ruling may have implications to those who intend
 to create "generic" competition based in non-fundamental changes to existing
 therapeutics or differing production techniques.
 
     Burrill & Company
     Burrill & Company is a private merchant bank, focused exclusively on life
 science companies (biotechnology, pharmaceuticals, diagnostics, human
 healthcare, related medical technologies, agricultural technologies, animal
 health, nutraceuticals, and biomaterials/bioprocess).
 
     Venture Capital
     The Burrill family of venture capital funds, with over $250 million under
 management, include the Burrill Biotechnology Capital Fund, the Burrill Agbio
 Capital Fund, and the Burrill Nutraceuticals Capital Fund.
 
     Strategic Partnering
     Burrill & Company assists life science companies identify, negotiate and
 close strategic partnerships providing access to resources, technologies or
 collaborations essential for executing their business plans.  We have
 completed more than 20 strategic partnerships with a value in excess of
 $1 billion.
 
     Spin-outs/Spin-ins
     Burrill & Company works with major life science companies to spin-out
 internal assets and capitalize on their value, ranging from the outright sale
 of products or businesses to creation of new companies to exploit these
 assets.  We also use our extensive network to help companies identify, assess
 and capture ("spin-in") products and companies strategic to building their
 businesses.
     For more information, please visit Burrill & Company's website at
 www.burrillandco.com.
 
                          Biotech Industry Fundraising
                                ($ in Millions)
 
     PUBLIC COMPANIES
                                       Secondary       Convertible
                        IPO              Public           Debt         Private
 
     1Q01               187                711               0           505
     1Q00             1,114              3,850           3,792         1,767
     4Q00             1,389              7,349             486         1,068
     2000             6,490             12,651           5,728         4,061
     2001YTD            187                711               0           505
 
 
 
                          Biotech Industry Fundraising
                                ($ in Millions)
 
     PRIVATE COS.
                  Venture                    Financing
                  Capital        Other         Total    Partnering(A)   Total
 
     1Q01            442           33          1,877         218        2,095
     1Q00            653           74         10,988         956       11,954
     4Q00            752           47         11,091       1,337       12,428
     2000          2,872          203         31,775       6,901       38,676
     2001YTD         442           33          1,877         218        2,095
 
     (A) Partnering figures based on upfront payments and equity investments
 only for disclosed transactions.
 
 

SOURCE Burrill & Company
    SAN FRANCISCO, Calif., April 2 /PRNewswire/ -- Following the year
 2000, the most phenomenal year ever for biotech with the industry raising
 $32 billion during the year and $7.3 billion in the first quarter of
 2000, year 2001 started at the opposite end, the least productive financing
 quarter for biotech in the last 8 quarters.  "With the biotech markets indices
 off 15 to 25 percent for the month and down as much as 80 percent from their
 mid 2000 high, investors waited by the sidelines watching the Dow and Nasdaq
 drive markets lower all quarter," said G. Steven Burrill, CEO of
 Burrill & Company.  The March 2001 quarter end reflected an industry market
 capitalization of $330 billion, down from its spring 2000 high of
 $500+ billion.  Investor enthusiasm for genomics following the spectacular
 announcement this quarter (February 12th) of the completion and the
 publication of the human genome sequence still couldn't stem the tide, as
 investors looked for liquidity and the highest of investment quality.
     "Financings totaled nearly $2 billion for the quarter, still an amazing
 amount of funding for our industry, which raised only $5 billion/year in
 '96, '97 and '98.  With the bar raised to $10 billion in '99 and $32 billion
 in 2000, it looks like a bad quarter," commented Burrill.  "But at a time when
 most think the equity market is dead, the industry still raised $2 billion."
 
     Financings
     Financings were off dramatically for the quarter.  Only 3 companies went
 public this quarter (raising $187 million versus $1.1 billion the same quarter
 last year):
 
                                                                       Market
                                           Amount  Price at            Cap at
                                 Offering  Raised   Qtr End           Qtr End
     Company          IPO Date    Price    (in $M) (3/30/01)  %Change (in $M)
 
     Exact Sciences
      Corporation
      (EXAS)          1/31/01      $14      $56.0    $7.62    -45.6     $143
 
     Third Wave
      Technologies
      (TWTI)           2/9/01      $11      $82.5    $7.00    -36.4     $274
 
     Seattle
      Genetics
      (SGEN)           3/7/01       $7      $49.0    $5.00    -28.6     $146
 
     SUMMARY           3 IPOs      Avg.     Total              Avg.
                                   Offr.    Raised:              %.
                                  Price:    $187.5            Change:
                                  $10.67                      -36.9
 
 
     The number of secondaries was also down significantly in the first quarter
 of 2001 compared to fourth quarter 2000:  only $711 million was raised in
 follow-on activity this quarter, compared to first quarter of 2000's follow-on
 activity of $7.3 billion, biotech's biggest ever.  "A slowing economy and
 falling markets created an unreceptive environment for such deals to take
 place," commented Burrill.
 
     First quarter 2001 secondaries included:
 
                                    AMOUNT
                                    RAISED
                         TICKER     (in $US    PRICE AT     PRICE AT        %
     COMPANY             SYMBOL    Millions)   SECONDARY     3/30/01    CHANGE
 
     Aviron               AVIR         200       $50         $41.56     -16.9
 
     Charles River
      Laboratories *       CRL        86.5       $19         $24.75      30.3
 
     Praecis
      Pharmaceuticals *   PRCS       186.4     $24.6         $19.94     -18.9
 
     Regeneron
      Pharmaceuticals     REGN       162.5       $25         $22.19     -11.2
 
                        TOTAL FOR
                         Q1 01
                         ($M)       $635.4
 
     * includes over-allotments
 
     M&A and Alliances
     "Traditionally when markets are tight and investors tentative, M&A picks
 up," commented Burrill.  "This quarter's blockbuster headline was Johnson
 & Johnson's $10.5 billion acquisition of ALZA, the biotech industry's biggest
 ever."  ALZA will provide J&J with a significant number of revenue generating
 drugs and drug delivery systems applicable to current J&J products.  J&J rival
 Abbott Laboratories attempted to acquire ALZA in 1999 for $7.3 billion, but
 was derailed due to antitrust concerns.
 
     A summary of the major M&A in the quarter included:
                                                                      Value
             Aquirer                    Acquired                ($US Millions)
 
     Johnson & Johnson                   ALZA                        $10,500
     ArQule                              Camitro                          95
     Charles River Laboratories          Primedica                        52
     Bio-Technology General              Myelos                           35
     Ilex Oncology                       Symphar                          30
 
     "While alliances also see upticks during periods of market uncertainty,
 it's too early to see that much activity," commented Burrill.
 
     Selected biotech/pharma alliances this quarter included:
 
                                                                        Value
      Biotech         Pharma                  Description               ($US
                                                                     Millions)
     CuraGen           Bayer           15 year obesity and diabetes    $1,340
                                       agreement expected to yield
                                       12 candidates for clinical
                                       development.
     Millennium        Abbott          The companies will develop      250
                       Laborat         diagnostics for obesity
                       -ories          and diabetes
     CuraGen           Bayer           Curagen will use its            124
                                       pharmaco-genomics and
                                       toxicogenomic technologies
                                       to evaluate Bayer's early
                                       -stage compounds
 
     EpiGenesis        Taisho          Epigenesis licensed EPI-2010    100
      Pharmaceuticals  Pharmaceuticals Asia rights to Taisho, in
                                       return for payment and co-
                                       development
 
 
     MorphoSys         Johnson         Morphosys technologies will     21
                       & Johnson       be used to generate Abs and
                                       perform target discovery for
                                       J&J subsidiary Centocor
 
 
     The Quarter's Product News
     -- Immunex halted trials of its rheumatoid arthritis drug, Enbrel, for the
 treatment of congestive heart failure, after the drug wasn't shown to be
 effective against the disease.
     -- Applera Corp.'s Applied Biosystems warned of slower mid-term growth.
 The Company blamed a slowdown in purchases of their highest-priced items, a
 stronger dollar weakening foreign sales and a slow down of manufacturing and
 sale of products currently undergoing life-cycle changes.  Applied Biosystems
 stock (ABI) lost almost 50 percent of its value in a day.
 
     THE BIG STORY
     Of course, the biggest story of the quarter was the sequencing and
 publishing of the human genome.  "A thousand years from now when looking back
 over the millennia, this moment in time will standout as one of those
 transforming moments when we first fully understood the human genome and the
 benefits to human healthcare, wellness, agriculture, biomaterials and the
 environment," commented G. Steven Burrill.
     Celera and the Human Genome Project published the results of sequencing
 the human genome in the March issues of scientific journals Science and
 Nature, respectively.  Upon further analysis, both camps agreed there are far
 fewer genes than was previously predicted, estimating the number to now be
 around 30,000 rather than 100,000 as was once thought.  Critics and companies
 who base their business models on the larger number, quickly pointed out that
 a small number of genes, as defined by the new guidelines, can still account
 for the previously estimated number of proteins, because one gene can code for
 more than one transcript/protein.
     Genome sequencing is continuing and resulted in the completion and
 announcement of many key organisms.  Celera announced completion of the mouse
 genome, an animal widely used in drug research.  Infectious agent E. coli
 O157, often termed the "burger bug," had its genome completed.  Researchers
 hope a better understanding of this troublesome pathogen will facilitate the
 development of better diagnostics that will detect its presence in the food
 supply.
 
     Other News of Note
     Stem cell research took center stage as President George W. Bush declared
 he was against federal funding of research on fetal tissue or stem cells
 derived from induced abortions.  But Bush reiterated his support of scientific
 progress by stating his support for adult-derived stem cells and stem cells
 taken from fetuses that died of natural causes.  This "battle" between
 science/industry and abortion opponents is still raging.
     Amgen won their patent litigation with Transkaryotic Therapies over
 erythopoietin.  Judge William Young ruled that despite differing production
 technologies, Transkaryotic Therapies did not show their invention was
 different from Amgen.  This ruling may have implications to those who intend
 to create "generic" competition based in non-fundamental changes to existing
 therapeutics or differing production techniques.
 
     Burrill & Company
     Burrill & Company is a private merchant bank, focused exclusively on life
 science companies (biotechnology, pharmaceuticals, diagnostics, human
 healthcare, related medical technologies, agricultural technologies, animal
 health, nutraceuticals, and biomaterials/bioprocess).
 
     Venture Capital
     The Burrill family of venture capital funds, with over $250 million under
 management, include the Burrill Biotechnology Capital Fund, the Burrill Agbio
 Capital Fund, and the Burrill Nutraceuticals Capital Fund.
 
     Strategic Partnering
     Burrill & Company assists life science companies identify, negotiate and
 close strategic partnerships providing access to resources, technologies or
 collaborations essential for executing their business plans.  We have
 completed more than 20 strategic partnerships with a value in excess of
 $1 billion.
 
     Spin-outs/Spin-ins
     Burrill & Company works with major life science companies to spin-out
 internal assets and capitalize on their value, ranging from the outright sale
 of products or businesses to creation of new companies to exploit these
 assets.  We also use our extensive network to help companies identify, assess
 and capture ("spin-in") products and companies strategic to building their
 businesses.
     For more information, please visit Burrill & Company's website at
 www.burrillandco.com.
 
                          Biotech Industry Fundraising
                                ($ in Millions)
 
     PUBLIC COMPANIES
                                       Secondary       Convertible
                        IPO              Public           Debt         Private
 
     1Q01               187                711               0           505
     1Q00             1,114              3,850           3,792         1,767
     4Q00             1,389              7,349             486         1,068
     2000             6,490             12,651           5,728         4,061
     2001YTD            187                711               0           505
 
 
 
                          Biotech Industry Fundraising
                                ($ in Millions)
 
     PRIVATE COS.
                  Venture                    Financing
                  Capital        Other         Total    Partnering(A)   Total
 
     1Q01            442           33          1,877         218        2,095
     1Q00            653           74         10,988         956       11,954
     4Q00            752           47         11,091       1,337       12,428
     2000          2,872          203         31,775       6,901       38,676
     2001YTD         442           33          1,877         218        2,095
 
     (A) Partnering figures based on upfront payments and equity investments
 only for disclosed transactions.
 
 SOURCE  Burrill & Company