"With oil prices soaring in early August and consumer confidence weakening towards the end of the month, biotech managed to reverse its downward trend with the Burrill Biotech Select Index posting a 2% gain for August," notes G. Steven Burrill. Burill is CEO of Burrill & Company, a San Francisco based life sciences merchant bank.
"The biotech market seems to have hit its bottom and we can expect to see values continue to grow in September, albeit slowly," he adds. "There are those on Wall Street who believe that the market will improve in the fourth quarter -- and historically, the fourth quarter is a strong one -- but we're unlikely to see as dramatic a comeback as some enthusiasts predict," he says.
"There is still uncertainty in the market with elections looming in the U.S. and terrorism continuing to make global headlines," Burrill continues. "I would argue that the summer doldrums were pretty real this year and that while we are on the recovery side, there is no galvanizing event waiting in the wings to trigger momentum," he says. "Plus the IPO window is temporarily out of commission ... that is, the value equation is so ugly that any company pushing to get out is viewed as desperate," Burrill says. "Institutional investors simply do not have the appetite for new offerings today," he adds.
The Burrill 2003/2004 IPO Index slid a fraction of a percentage point in August but is up nearly 5% year to date. "There have been 33 biotech IPO deals in this recent 2003/2004 window with 20 entering the market below range," notes Burrill. "Although, as a group, this cluster of companies managed to gain an average of nearly 6% on opening day, their performance to date is down by 11%," he says.
The Burrill Agbio Index rose 4% in August and is up 8% for the year. Better second quarter performance helped raise Large Scale Biology (LSBC) shares 20% during the month. Terra Nitrogen Company (TNH) shares also rose on improved second quarter performance and ended the month up 19%. Shares of Delta and Pine Land (DLP) rose 13% on the announcement that D&PL has acquired licenses from Syngenta to deliver novel biotechnology products to cotton growers worldwide. Delta & Pine Land will pay Syngenta $47 million over three years. This agreement is D&PL's first with a company other than Monsanto as a supplier of genetically modified crop technology for its commercialized products and could boost D&PL's earnings due to changes in fee structures that would benefit Delta & Pine Land.