Biotech Takes It on the Chin in October

SAN FRANCISCO, Nov. 2 /PRNewswire/ -- It was a turbulent month as stocks
values waxed and waned throughout culminating in a dramatic plunge on the last
trading day of October as a report about a drop in consumer spending fueled
worries that the economic recovery wouldn't be sustainable. The drop served to
erase the previous day's big gains.

Biotech's steady improvement during the third quarter also came to an abrupt
stop with the Burrill Biotech Select Index posting a 10 percent fall in value
in October in contrast to the Dow, which finished unchanged and the NASDAQ,
which fell 3.6 percent in value.

Almost all members of the Burrill Biotech Select Index saw a reversal in their
share values. Heading the list was Affymetrix Inc. whose shares dropped
sharply and closed the month down 40 percent after it posted disappointing
third-quarter results and offered a soft revenue forecast for the fourth
quarter. Rival Illumina Inc.'s shares suffered a similar fate closing the
month down 24 percent after it reported third-quarter results and 2009
guidance below analyst estimates.

Amgen and Biogen both saw their share values drop 10 and 16 percent
respectively. Biogen Idec's shares were hit following reports that the number
of cases of a rare brain infection in patients taking Biogen's drug Tysabri is
higher than previously reported. European regulators reported 24 cases of
so-called progressive multifocal leukoencephalopathy (PML), more than twice
the 11 cases Biogen reported in July. Amgen saw its shares drop on news that
the FDA had requested additional clinical trials for its drug candidate Prolia
before it will consider approving the drug for the treatment of bone-loss in
breast and prostate cancer patients.

"There wasn't a lot to cheer about for biotech companies in October," said G.
Steven Burrill, CEO, Burrill & Company, a San Francisco based global leader in
life sciences with activities in Private Equity, Venture Capital, Merchant
Banking and Media. "The nervousness about the strength of the economic
recovery combined with weaker or average financial results took its toll on
biotech's top companies.

"However, it wasn't just biotech's elite companies that took a hit. With
investors nervous about the economy they have taking profits and cashing in on
the excellent gains made by emerging biotech companies and, as a result, the
Burrill Biotech Mid-Cap Index fell a whopping 18 percent and Burrill Biotech
Small Cap Index was down 15 percent for the month.

"There has also been some investor uncertainty over the healthcare reform
debate and this is likely to continue, as the legislators wade through the
proposals," commented Burrill. "The drug industry certainly will take a big
hit in the House bill, which was released by the Democrats at the end of the
month. For elderly people who are eligible for both Medicare and Medicaid, the
bill mandates rebates from the drug makers so that the Medicare system ends up
paying less. Those rebates are estimated to cost the industry $60 billion over
a decade.

"The bill is in favor of allowing 12 years of data exclusivity for biotech
drugs and that is good for our industry," concluded Burrill. "It is clear that
there will be plenty of debate in the upcoming month as legislators try and
get the healthcare reform bill passed before the end of the year. With 25-50
million Americans added to the healthcare system, revenues for the healthcare
industry should increase... so the bills are a mixed bag for pharma, med
devices and biotechs."

IPO watch
In the early part of October it looked as though the IPO window was opening a
crack as Omeros Corporation became the first venture-backed biotech to go
public this year. It priced its IPO of 6.82 million shares at $10 per share,
but then saw its shares drop almost immediately, closing down 13 percent on
its first day of trading (it closed out the month down 44.3 percent). The
company will use the funding to complete its phase III trials of its lead drug
candidate, which is being evaluated for use during arthroscopic surgery to
improve postoperative joint function and reduce postoperative pain.

"Omeros' opening and subsequent share price performance underscores the
difficulty that will exist for many biotech companies that are not yet
profitable and are thinking about raising money in the public markets," noted
Burrill. "We are likely to see more than 20 companies add themselves to the
IPO runway this quarter with the hope that around the time of the JP Morgan
Healthcare Conference in early January 2010 the markets will be receptive
enough to invest in new biotech issues. The first biotech IPO movers of the
new year will have to perform well if we are to see the IPO window opening."

Durham, North Carolina based Aldagen took its place in the queue of companies
hoping to go public in the coming months as the IPO window begins to open. The
company, which develops regenerative cell therapies, had initially filed to go
public in May of 2008 but withdrew those plans last October when the stock
market melted down.

Now that the markets have strengthened, the company hopes to raise an
estimated $80.5 million in an initial public offering to fund a phase III
trial of its most advanced therapy for the treatment of critical limb
ischemia.

By the numbers
(From the monthly Burrill Report (www.burrillreport.com)
Biotech Industry Market Cap: $322.2 billion (down 5.3 percent for the month
ending 10/30/09)
Number of public companies: 320
- There are 49 companies that have market caps greater than $1B
- There are 36 companies that have market caps between $500 and $999M
- 136 public biotech companies (41%) have a market cap below $100 million

October Indices:

12/31/08 8/31/09 9/30/09 10/30/09 %change %change
Month Year
INDEX

Burrill Biotech
Select 300.33 309.76 315.89 284.65 -9.89% -5.22%
Burrill Large Cap 379.7 450.36 474.8 431.13 -9.20% 13.54%
Burrill Mid-Cap 139.39 176.26 185.65 151.29 -18.51% 8.54%
Burrill Small Cap 78.35 100.56 103.1 87.74 -14.90% 11.98%
Burrill Genomics 59.69 122.84 127.28 113.9 -10.51% 90.82%
Personalized
Medicine 79.63 88.72 91.99 86.72 -5.73% 8.90%
NASDAQ 1577.03 2009.06 2122.42 2045.11 -3.64% 29.68%
DJIA 8776.39 9496.28 9712.28 9712.58 0.00% 10.67%
Amex Biotech 647.15 925.56 922.88 820.99 -11.04% 26.86%
Amex Pharma 272.84 283.53 287.13 287.25 0.04% 5.28%

About Burrill & Company
Founded in 1994, Burrill & Company is a San Francisco-based global leader in
life sciences with activities in Venture Capital, Private Equity, Merchant
Banking and Media. The Burrill family of venture capital funds has over $950
million under management and its merchant banking business is one of the
industry leaders in life sciences transactions. Burrill is also the creator,
sponsor and facilitator of leading industry conferences worldwide and
publisher of the monthly The Burrill Report (www.burrillreport.com) which
tracks the progress of the global biotechnology industry and annual "State of
the Industry" report. (www.burrillandco.com)

SOURCE Burrill & Company

Peter Winter, Editor of Burrill Report, +1-415-591-5474, pwinter@b-c.com, for
Burrill & Company