Biotech stocks in 2006, and outlook for 2007, as seen by Burrill & Co

"The biotech industry finished the year by giving back over half the stellar gains earned by its 'blue chip' companies in 2005, a year in which they increased 22%, with the Burrill Biotech Select Index closing 2006 down 14%," said Steven Burrill, chief executive of Burrill & Co, a San Francisco, USA-based life sciences venture capital, merchant banking and media business. "It could have been a lot worse because, by June, the Index was down approximately 20%," noted Mr Burrill, "but, thanks to product successes and strong third-quarter financials, biotech's leading market cap companies strengthened their share prices and posted strong monthly performances to claw back some of the earlier reversals."

Overall, he noted, "it wasn't a great year for biotech and, on reflection, it will finish the year almost as it started, with the industry's collective market cap at approximately $490.0 billion. Interestingly, we saw some stellar gains by individual large cap companies such as Gilead and Vertex Pharmaceuticals (up 21% and 40%, respectively, year-to-date) that were balanced out by companies that crashed and burned such as Neurocrine Biosciences (down 85%)," said Mr Burrill.

Although, biotechnology's blue chip companies were unable to sustain their momentum in 2006, with Genentech and Amgen down 12% and 11% year-to-date, it was the mid-capital and small-cap companies that carried the load. The Burrill Mid-Cap Biotech Index was up 15% and the Burrill Small-Cap Biotech Index performing almost as well, rising 13% and these increases mirrored the Dow Jones Industrial Index, which rose a respectable 15%, and Nasdaq 11% higher for the year.