06 Jan The Good, Bad, Ugly of Midwest Biotech in 2003
The Good
Let’s start with the good in Midwest biotech in 2003. What’s clearly striking is the outstanding performance of the publicly traded Midwest biotech companies as measured by the ePrairie Midwest Biotech Index, which evaluates the top 20 biotech stocks of the region.
Last week, I commented on the stellar performance of the Nasdaq and Amex Biotech indices, which grew 45 percent last year and actually ticked up even more in the last trading days of the year. Still, they did lag behind the hot Nasdaq Composite, which had 49 percent growth.
The ePrairie Midwest Biotech Index more than doubled this growth with a burning-hot increase of 95 percent. Of the 20 stocks in the index, only three lost value during 2003.
In order to measure just how good 2003 was to our Midwest public biotech stock, let’s look at two parameters: stock price growth and market cap increase. The leaders in the first category were:
The leaders in market cap increase were:
In total, the 20 or so companies comprising the ePrairie Midwest Biotech Index increased their combined market valuation by $4.1 billion during 2003 to a level of $8.3 billion. The Midwest biotech group now has four companies with market caps in excess of $1 billion: MGI Pharma, KV Pharmaceuticals, Dade-Behring and Esperion Therapeutics.
The Bad
Unfortunately, we will be losing some of our public companies in the Midwest:
1. As announced in December, Esperion Therapeutics will be acquired by Pfizer.
2. Cima Labs will be acquired by Cephalon.
3. DOR BioPharma moved its headquarters to Miami.
The Ugly
Though at least seven biotech companies went public during the fourth quarter of 2003, none of them were from the Midwest. Furthermore, there were more IPOs filed but pulled during this time period due to the weak reaction from the financial community.
Of the almost $19 billion raised by the biotech community in the U.S. during 2003 (an excellent year), Midwest companies accounted for a small amount of this sum (some $300 million to $400 million, both private and public) or about 2 percent of total money raised.
Considering that at least 20 percent of biotech and life science companies are located in the eight-state Midwest region, this is a disparate amount of money raised in relationship to the number of companies and reflects the early stage of development of most Midwest companies and the small size of most (not all) VC biotech-related funds in the Midwest
Nevertheless, the amount of overall funding of the sector in the Midwest was very low and even lower at the VC level. Though a number of state initiatives for funding start-up biotech and life science companies were announced, very little of this money really trickled into company coffers.
The star company in raising money during 2003 was MGI Pharma, which raised more than $150 million in its secondary round. This represents almost 40 percent of all money raised in the sector. Still, it is a new year with a clean slate and the market seems to be moving forward on solid ground. Hopefully, “the rising tide” financing effect will work its way down to even our smallest companies.
The JPMorgan Chase H&Q 22nd Annual Healthcare conference will be held next week at the Westin St. Francis in San Francisco. This “bell weather” financial biotech meeting sets the stage for financing prospects at least during the first half of the year. It will be interesting to monitor daily progress of this several-day meeting to see if optimism or pessimism pervades both the financial and biotech audiences.
See you next week and happy new year!
Michael S. Rosen is the vice chairman of human health at the Illinois Biotechnology Industry Organization (IBIO). He can be reached at rosenmichaels@aol.com. This article has been syndicated on the Wisconsin Technology Network courtesy of ePrairie, a user-driven business and technology news community distributed via the Web, the wireless Web and free daily e-mail newsletters. They can be found at www.eprairie.com.
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