MARKET COMPASS | Bland first quarter was punctuated by HGS mini-drama
BY MALORYE A. BRANCA, DAVID HOFFER, AND LAKSHMI NAMBIAR May 19, 2004 | Biotech guru Steven Burrill hailed the first quarter of 2004 as biotech's best funding quarter in the industry's 30-year history. But it was also a strange one. The string of IPOs initiated in Q4 2003 continued, but so did the feeble showings. Nonetheless, biotech gulped $5 billion in funding in Q1, boosting the Nasdaq Biotechnology Index as compared to a year ago. If the approvals keep coming, interest in biotech as a whole should stay high.
Having said that, the Mirus Genomic Index companies could not maintain the previous quarter's strong appreciation. Tools companies gained a mere 1 percent, whereas discovery companies saw a decline of 0.2 percent in their respective market capitalizations.
On the tools side, Affymetrix saw the strongest growth — adding $556 million to its market capitalization and 33 percent to its share price — driven mainly by the strong Q4 results with net income increasing more than five-fold, topping analysts' expectations.
Applied Biosystems Group dropped $256 million in market value, likely driven by the still-constrained growth of the U.S. life science research market. Varian's market capitalization dropped $101 million, driven by a 7-percent decline in share price. Varian also announced the acquisition of OpTx, a privately held supplier of oncology software.
Discovery Dip
On the discovery side, the 0.2-percent dip in the index was driven by a number of weak performers. For example, Millennium Pharmaceuticals' market capitalization dropped by $443 million (9-percent decrease in share price) due to poor Q4 results. Human Genome Sciences also saw a $139-million decline in its market capitalization (8-percent decrease in share price). The company has produced several clinical candidates but has yet to achieve traction with any of them. HGS CEO William Haseltine also announced his retirement later this year, to make room for "a new CEO with demonstrated skills in late-stage product development, manufacturing, and pharmaceutical sales and marketing," according to a company press release.
| 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.
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Genome Therapeutics saw the strongest growth in the past quarter. It added $299 million to its market capitalization, with its share price soaring 72 percent, issuing approximately 43 million shares in connection with its merger with Genesoft Pharmaceuticals.
David Hoffer is a managing director, and Lakshmi Nambiar an analyst, at Boston investment bank RCW Mirus. Malorye A. Branca is Bio·IT World's senior informatics editor.