By Malorye Branca
January 15, 2003 | After months of bleak tidings, a wisp of good news emerged at the end of 2002.
Vertex Pharmaceuticals Inc. delivered the first compound from its 2000 megadeal with Novartis. Oxford GlycoSciences Plc received a European Union recommendation for approval for its lead product. And Millennium Pharmaceuticals Inc. announced encouraging results of a Phase II trial for Velcade. Millennium will apparently seek approval of Velcade for relapsed and refractory multiple myeloma one year earlier than anticipated.
|This issue marks the debut of Bio·IT World's Market Compass, a quarterly report prepared by Senior Informatics Editor Malorye Branca, which will track progress and forecast prospects across the bio-IT industry. A staple of these reports will be the Mirus Genomic Index, courtesy of investment banking firm RCW Mirus Inc.
Read Mirus Genomic Index
Overall, dealmaking slowed marginally last year, and values dipped. According to Cambridge Healthtech Institute's Drug Discovery and Development Deals Database, about 1,000 genomics deals were completed last year, compared to 1,281 in 2001 and 932 in 2000. Products, especially in later phases, became the hot commodity, and fewer technology purchases were made. Mergers and acquisitions abounded, as companies sought cash or key capabilities (e.g., chemistry). DeCODE Genetics and Exelixis Inc. landed the biggest Big Pharma deals, with Merck & Co. and GlaxoSmithKline, respectively, both worth approximately $90 million.
Further consolidation and company shifts from tools to drug development are in the offing. "How long this goes on depends on what happens in the public markets," says Bryan Roberts, general partner at Venrock Associates. "But my guess is that we are closer to the beginning than the end." Roberts is looking at dozens of biotech companies running on less than a year's worth of cash reserves.
As the inaugural Mirus Genomic Index shows, the start of 2003 sees toolmakers generally faring better than their counterparts in discovery.
Indeed, the genomic and proteomic tool industry shows welcome signs of maturation, with growing revenue for toolmakers Affymetrix Inc. and Ciphergen Biosystems Inc. Affymetrix has even hit profitability, posting $62.9 million in product revenue in the third quarter of 2002, with net income of $619,000 ($0.01 per share), more than $15 million better than Q3 2001. And Ciphergen, while enduring widening net losses, has almost doubled its revenue, reaching $10.2 million in the third quarter of 2002.
Investment money also exists, but judging from last year's major financings, companies must demonstrate quality pedigrees among their founders and advisors to warrant serious consideration. Infinity Pharmaceuticals, Anadys Pharmaceuticals Inc., and Phenomix Corp. netted $70 million, $38 million, and $32 million, respectively. For most new companies, the mantra is now "integrated platform."
Genomic drug pioneers Millennium and Human Genome Sciences are focused squarely on getting products to market. None of their lead compounds are genomics-based, but as long as they report progress, investors probably won't care. Like its rivals, Oxford GlycoSciences is leading with an in-licensed product. But the company has plenty of proteomics-based candidates queuing up behind Zavesca (for type 1 Gaucher's disease).
Myriad Genetics Inc., meanwhile, is scrambling to plump up its therapeutic pipeline — a necessity in the post- genomic economy. Last fall, Myriad raised $57 million through a stock offering. The company's lead therapeutic candidate is Flurizan, which is in Phase II trials for prostate cancer. Myriad has a growing line of predictive cancer tests, and even if these diagnostics aren't helping the company's reputation with investors momentarily, its revenue is climbing.
The genomics bubble will leave at least two legacies. Investing based on buzzwords — anything ending in "-omics" — is surely out, and most companies will validate their technologies themselves. The result should be a stronger industry and some exciting new products.
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