Biotech's in for a good year, says Burrill

The Burrill Biotech Select Index slipped 4.6 per cent in January, but Steve Burrill is bullish about 2005, despite the ramifications of the Merck-Vioxx situation spilling over into the biotech sector.

"We're anticipating a good year for biotech and the markets in general," said Burrill, adding that he was optimistic about the US economy.

Burrill noted that in 2004, investors differentiated biotech from big pharma. While the Dow Jones US Pharmaceutical Index dropped 10 per cent over the year, the Burrill Biotech Select Index was up 8 per cent. In January the Biotech Select Index was dragged down by the poor stock performance of several large companies including Millennium Pharmaceuticals, which slumped 24 per cent after warning it would post a 2004 loss, and Genentech, down 12 per cent after its fourth quarter results fell below analysts' expectations

Burrill noted that many companies which went public in 2003 and 2004 lost share value in January for no apparent reason, including Eyetech Pharmaceuticals and Corgentech.

Full steam ahead

Burrill drew attention to the initial public offering of stem-cell company Viacell, which which is up 57 per cent since its January debut. "The momentum for biotech has begun in January 2005," he said. Other successful IPOs included Martek, a profitable biotech that makes nutritional fatty acids, which raised US$75 million. Four IPOs are also expected to "price" in the first week of February.

But Burrill warned that pressure on the FDA to instate greater scrutiny of drug approvals would translate to more exhaustive and costly clinical trials for both for big pharma and biotech. "Kevin Sharer, CEO of Amgen recently warned that US Medicare reimbursement policies might affect biotech negatively, citing that two of Amgen's flagship products, Aranesp and Epogen might be vulnerable," he said.

"But technologies which can help segregate and identify patients who will be responders to certain therapeutics may bridge the gap between regulators and industry... and biotech is bringing these 'theranostics' technologies to market."

In January, the FDA approved two products coming out of biotechnology. Roche received FDA approval to sell a gene test developed with biotech partner Affymetrix, that helps physicians personalise drug doses and enhance drug safety. The AmpliChip CYP450 test, analyses variations in two genes that play a big role in metabolism and establishes at what rate a person absorbs the medicine. In Europe, where the test was approved in September, the test costs about US$525 but only needs to be administered once in the patient's lifetime.

The agency also approved a new treatment for metastatic breast cancer from American Pharmaceutical Partners called Abraxane, which is a new form of Bristol-Myers Squibb's breast cancer drug, Taxol.

New FDA commissioner closer

The FDA, still under the aegis of an interim commissioner, is under pressure to appoint a permanent leader now that the Congress has confirmed Michael Leavitt as the new secretary of Health and Human Services, to succeed Tommy Thompson.

"We're starting off 2005 with several new people at the helm, all of whom bring tremendous talent and energy to their jobs," said Burrill. "In addition to the new secretaries for HHS and USDA, our own industry has a new leader in Washington-Jim Greenwood who has assumed the role as president of BIO, following Carl Feldbaum's retirement. Greenwood's agenda this year will be tough, particularly with so much pending on the CMS front.

Other Burrill indices were also down in January including:

• Large-Cap Index (lost 2 per cent)
• Mid-Cap Index (lost 8 per cent)
• Small Cap Index (lost 10 per cent)
• Diagnostics Index (lost 1 per cent)
• Industrial Biotech Index (lost 1 per cent)