Biotech Red Hot in July as Potential Blockbuster M&A Deals Awake Investors from Their Summer Slumber, Burrill Reports.

SAN FRANCISCO -- For biotech the summer months of July and August are typically slow as far as the capital markets are concerned. However, the announcement that Roche made a bid of almost $44 billion for the 44% remaining shares of Genentech it didn't already own certainly galvanized investors' attention as they rushed into biotech stocks in light of the offer, reasoning that more deals may be in the offing.

They didn't have long to wait either with Bristol-Myers Squibb making an all-cash offer to acquire the shares of ImClone Systems it did not already own for $4.5 billion. Bristol currently controls about 17.0% of ImClone, its partner on colon-cancer drug Erbitux.

"The biotech product 'land grab' by big Pharma, which intensified when they started feeling the pain of their own blockbuster products coming off patent and facing the specter of increasing generic competition, has reached fever pitch," said G. Steven Burrill, CEO, Burrill & Company, a San Francisco based global leader in life sciences with activities in Venture Capital, Private Equity, Merchant Banking and Media. "One or two marquee biotech company acquisitions per year have been part of the biotech scene for at least fifteen years," added Burrill, "but it looks like the floodgates have opened and these two potential big takeover deals represents the start of what will be a very busy second half of the year for mergers and acquisitions in biotech land.

"Our analysis1 has shown that since 2005, over $60 billion has been invested in biotech company acquisitions by the pharma industry taking into account the market cap of each company at the time of its acquisition. The acquisitions of Genentech and ImClone could potentially add a further $106 billion in biotech value for pharma."

The collective market cap of the industry hit an all time high of $510 billion on the final trading day of July eclipsing the previous record of $507 billion set in April 2007. In addition to Genentech, which topped $100 billion at month end, Amgen had an excellent run with its market cap finishing at $68 billion. The company's shares surged following news that its osteoporosis drug candidate, denosumab, reduced the incidence of fractured vertebrae in postmenopausal women, meeting a late-stage study goal. Its shares received a further boost after reporting better-than-expected earnings on a rebound in sales of its anemia drug Aranesp. To cap it all off Amgen reported that it had licensed a fully human anti-nerve growth factor antibody for the treatment of chronic and neuropathic pain to Ortho-McNeil-Janssen Pharmaceuticals, Inc., a Johnson & Johnson company. The terms of the agreement include a $50 million upfront payment and the potential for $385 million in success-based milestones.

Biotech stocks were also helped by an improvement in consumer confidence as oil prices receded in July. But Wall Street could not shake off its worries about the overall economy and the Dow finished essentially unchanged, the NASDAQ closed the month up 1.4% while Burrill Biotech Select Index, a price-weighted index tracking 20 of biotech's "blue chip" companies, finished up a whopping 14%.

"Biotech's elite companies have spent most of July pushing higher, benefitting from a series of favorable headlines and merger fever in the air," commented Burrill. "This translated into the substantial gain of over 16% in the Burrill Biotech Large Cap Index. But even more remarkable was the performance of the mid-cap companies, with the Burrill Biotech Mid-Cap Index jumping 18%. All year the market conditions have proved to be tough on these emerging biotech companies yet every one in the group posted positive gains in July.

"Is this the harbinger of a biotech rally? Certainly, as the financial markets settle down we will see biotech benefit from increased M&A activity. I would expect the next few months to be good ones for the industry and by the fourth quarter of 2008 we will begin to see a resumption of biotech IPOs getting done," speculated Burrill.

Biotech Indices

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1. Analysis of Biotech M&As appears in the August/September issue of the Burrill Biotechnology Report along with complete statistics and data on biotech's performance to the end of 2Q '08

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 over a dozen leading industry conferences worldwide and publishes a range of bio-intelligence reports including the monthly Burrill Biotechnology Report and annual "State of the Industry" report, the 22nd Edition is entitled Biotech 2008: Life Sciences - A 20/20 Vision to 2020.