Biotech Posts Weak Performance in April

Despite the rise in the shares of Dendreon (Seattle, WA, USA) on the announcement that its prostate cancer therapy Provenge had finally been approved by the U.S. Food and Drug Administration (FDA), the biotech sector could not build on that event and turned in a lackluster performance for April 2010 with the Burrill Biotech Select Index falling 2% in the month, according to a recent biotech financial report.

Not helping the cause was the fact that several companies including Amgen (Thousand Oaks, CA, USA) and Gilead Sciences (Foster City, CA, USA) cut their profit forecasts citing the impact of costs from U.S. healthcare reform in their outlooks. Gilead closed the month down almost 13%. Although the company reported a 45% jump in quarterly profit, it lowered its full-year revenue forecast due to the recently passed healthcare reform legislation. They reported that its impact would be felt primarily in the company's HIV treatment business. Amgen, whose shares dropped 3.6% in April, estimated that going forward, healthcare reform would cut annual U.S. sales revenue by 5-6% and US$200 million to $250 million this year.

The new U.S. healthcare law calls on drug companies to offer higher price rebates for government-funded health plans and will eventually require them to pay a fee based on their market share of the public plans. Some of the changes went into effect at the beginning of the year and all will be phased in by January 1, 2014.

"The industry convenes in Chicago [IL, USA] this week for BIO 2010, where over 18,000 delegates from around the world are expected to attend, and despite April's performance of the blue-chip biotech companies, the sector is certainly in much better shape than it was one year ago when BIO 2009 was held in Atlanta," said G. Steven Burrill, CEO, Burrill & Company (San Francisco, CA, USA), a global life sciences company with activities in private equity, venture capital, merchant banking, and media. "We are beginning to see signs of investor confidence return with capital markets rebounding. In the past year, 10 biotech initial public offerings IPOs [initial public offerings] have been completed with seven of these going out in the past four months, which is certain good news although investors continue to be selective. The mood at this year's BIO convention will certainly be more upbeat than last year."

According to the numbers compiled by the Burrill Report, the industry closed the month with a collective market cap of $382 billion (no change for the month); 56 biotech companies (18.6%) have market caps greater than $1B (compared to 49 companies at the same time last year). The Burrill Biotech Select Index is up 5.6% year-to-date. (The April 2010 edition of the Burrill Report has a breakdown of the industry's Q1 2010 performance and copies are available on request.)

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