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MARKET COMPASS | Market values increase as companies deal and deliver in the fourth quarter 

By Malorye A. Branca, David Hoffer, and Bas van der Brugge

February 18, 2004
| Good news outweighed bad for the third straight quarter, keeping the Mirus Genomic Index headed upward. In Q3, tools companies outperformed discovery (with 21-percent and 2-percent market value growth, respectively). In Q4, discovery companies outpaced their tools counterparts, with 18-percent versus 10-percent growth. Millennium Pharmaceuticals was the discovery category's top performer, adding $1.06 billion to its market capitalization. Its 22-percent share price increase followed early approval of anti-cancer drug Velcade for the treatment of multiple myeloma. Velcade is currently in trials for use against more cancers.

Another pioneer, deCODE Genetics, continued making gains with a 92-percent increase in share price and an addition of $214 million to market capitalization since last quarter. DeCODE announced new obesity gene discoveries with Merck and milestones with Roche in the development of gene-expression assays that predict responsiveness to common treatments for asthma and hypertension. The aim of this project is to develop clinical diagnostic tools.

CuraGen published the first comprehensive protein interaction map for a multicellular organism, Drosophila melanogaster. Dubbed "the dawn of systems biology," the map boosted CuraGen's share price by 24 percent, adding $206 million to its market capitalization. Genome Therapeutics' market capitalization jumped $21 million, as the company prepared to merge with Genesoft Pharmaceuticals.

Vertex Pharmaceuticals was one of only four discovery companies that lost market value. Its market capitalization dropped by $135 million after the company voluntarily halted a Phase II trial of its experimental rheumatoid arthritis treatment Pralnacasan, based on animal toxicology studies. Vertex is continuing Phase I trials of the drug.

Mirus Genomic Index 

The Mirus Genomic Index is calculated as the sum of the market capitalizations of all included companies and is consequently a value-weighted index. It serves as an indicator of the financial health of the industry.

Current Index 
On the tools side, several companies contributed to the index's net 10-percent increase over the quarter. Invitrogen was the top performer, rising $736 million in market value (26 percent relative performance) after announcing the acquisition of Bio-Reliance for $500 million. Varian's market capitalization rose $355 million (33 percent relative performance), mainly driven by strong Q4 revenue growth. Strategic alliances with NuGEN Technologies and Qiagen helped Affymetrix increase its market capitalization by $200 million (16 percent relative performance).

The end of the year also saw a burst of big deal activity. Lexicon and Sequenom each snagged their first drug discovery and development collaborations, with Bristol-Myers Squibb and Procter & Gamble, respectively. The Lexicon deal was worth about $66 million, while Sequenom stands to net $30 million.

David Hoffer is a managing director, and Bas van der Brugge an associate, at Boston investment bank RCW Mirus. Malorye A. Branca is Bio·IT World's senior informatics editor.

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