Burrill & Co.: Let the good times in biotech roll

Article

Financial-services firm's index of biotech stocks rose 40.5% in 2012; predicts a better year for financings and M&A activity in 2013

Burrill & Co. (San Francisco) started 2013 with an end-of-2012 report that demonstrates surprising strength in life sciences, especially biotech-based businesses, and predicts an equally good new year. (the company, which provides both financial analysis of the industry and venture-capital and other funding, is very much a player in the industry’s evolution.) The good news begins with FDA’s success in approving 39 new drugs—including eight in the month of December: FDA’s “highest level since 1996 when the agency cleared a backlog of applications.” Nearly half of the new approvals had orphan-drug status, which is rapidly becoming a preferred way to commercialize new molecular entities. "The passage in 2012 of new incentives for developing rare disease drugs [via PDUFA — ed. note] will only further fuel this trend, particularly as more precision therapies are developed to target subpopulations of patients with a given disease."

The 40.5% increase in the Burrill Select Index compares with a 7.3% increase for the year in the DJIA; and a 13.4% increase in the S&P 500. US life sciences companies (Burrill also tracks bioenergy and industrial biotechnology) raised $71.1 billion—a record—in public and private financings, up from $57.4 billion in 2011. There were 16 companies completing initial public offerings (IPOs)—the same as last year—and those IPOs showed a year-end return of 15.3%, although 12 of the 16 opened at prices below their target range.

Global M&A activity in life sciences totaled $109.2 billion, down 31.2% from the year before. The biggest deals included Bristol Myers Squibb’s acquisition of Amylin Pharma ($7 billion), GlaxoSmithKline’s $3-billion purchase of Human Genome Sciences, and Dainippon Sumitomo Pharma’s acquisition of Boston Biomedical ($2.6 billion).

The $100 genome

Looking ahead, Burrill predicts 35 new drug approvals from FDA in 2013. Additionally, the industry will raise $100 billion in capital, mainly of large companies and the use of debt. “Traditional venture investors will become less relevant to start-ups as they continue to migrate not only toward later-stage deals, but public company investments as well. Angel, corporate venture, disease advocacy groups, and philanthropic organizations will fill the growing gap,” says the company.

On the reimbursement side, Burrill predicts that “Payers will increasingly reimburse whole genome sequencing selectively on an individual patient basis as the falling cost of sequencing drives doctors' interest in making use of the tool for diagnostic purposes.” The transition from a “$1000 genome” to a “$100 genome” is real, the company says. Meanwhile, “Comparative effectiveness will become a reality for drugmakers in 2013 as they prepare to meet the growing demand of payers to demonstrate value and justify pricing of their new products. Investors will shift emphasis from a focus on whether a drug will be approved, to whether payers will see value in a product and if companies will be able to capture value."

Recent Videos
Related Content
© 2024 MJH Life Sciences

All rights reserved.