Biotech may be poised for "big year"

Biotechnology is poised for a boom year in 2004, wrapping up 2003 with a strong recovery and plenty of reason for optimism, in the forecast of G. Steven Burrill, chief executive officer of the San Francisco-based life sciences merchant bank, Burrill & Co.

The industry's market capitalization hit $330 billion by the end of November, and although this remains "way off" the nearly $500 billion market cap reached in the second quarter of 2000, it nonetheless represents a 32 percent surge since the beginning of this year, he said. Burrill reviewed this year as it comes to a close and offered his forecast for the new year in a detailed press release Thursday.

Highlights for this year include: "stellar performance on Wall Street" with both a "dramatic" price recovery and the raising of more than $16 billion in financing; seven new companies entering the public equities markets; the U.S. Food and Drug Administration (FDA) approving more than 19 biotech drugs; and the $400 billion Medicare overhaul.

As a result, "biotech will have a big year in 2004 with Medicare resolved in the industry's favor, close to 400 drugs advancing through clinical trials, rekindled investor interest and a sizeable sum of money" in the bank, he said. Biotech will raise as much as $20 billion in financing during 2004.

However, the industry isn't likely to experience another year of public-market trading that rises 50 percent as it did during the height of the Internet bubble, he said. Growth this year was mostly recovery, so next year will lead to "genuine" value gains with growth likely in the 25 percent to 40 percent range on Wall Street, Burrill said.

The initial public offering (IPO) market will be "choppy" for the first half of 2004, but smooth out with 25 to 30 IPOs during the year, he said.

The year will also bring continued consolidation among big pharmaceuticals companies, as well as more partnerships forged out of "desperation to find more innovation." One or two "marquee level" biotech mergers also could happen in 2004, along the lines of Idec Pharmaceuticals Corp. and Biogen Inc., which made headlines this year. Such mergers could occur as larger-cap biotechs compete directly with big pharma.

U.S. lawmakers will shift attention from Medicare and reimbursement issues to areas like drug reimportation, which will be "challenging," Burrill said. Bioenergy research and development will be another issue, as will biodefense.

Science will drive pharmacogenomics into the forefront in the new year. Another emerging area will be "neutraceuticals," or drugs related to the correlation between diet and disease. It's not likely 2004 will be as "spectacular" on Wall Street for companies in that area, but even so they will continue to amass better clinical data and links between diet and disease, Burrill said.

New tools and technologies for genomics, proteomics and systems biology will be developed in 2004, leading to "better understanding of proteomics and how our biological systems really work" that will in turn "bring protein medicine further, faster and hopefully cheaper," he said.

Beyond U.S. borders, Europe, China, India, east Asia and Australia will have "more robust" biotech industries, contributing new technology and becoming markets for biotech products and capital sources, Burrill said.