CHICAGO – The opening of the 2013 Biotechnology Industry Organization's (BIO) annual International Convention in Chicago not only marks a celebration of the event's 20th anniversary but also is the second return to the Windy City during the past three years. When BIO 2010 convened here at the beginning of May the biotechnology industry was still reeling from the unprecedented global economic perturbations that tanked the capital markets in 2009.

However, there was some promising news to help give the sector a lift going into that meeting. Dendreon Corp., for example, secured its long sought-after FDA approval for prostate cancer vaccine Provenge (sipuleucel-T), an event that company president and CEO at that time Mitchell Gold hailed like "the dawn of an entirely new era in medicine" and "the Holy Grail of oncology." (See BioWorld Today, April 20, 2010.)

However, this event flattered to deceive with the industry failing to establish much momentum from Dendreon's product success. The day after the BIO 2010 meeting closed, the Dow Jones Industrial average was sitting at 10,380 and was to dip below 10,000 briefly a couple of months later.

It was from that low point that the markets, and with it biotech's fortunes, slowly began to recover. The sector, in fact, closed out the year with significant momentum with the BioWorld Stock Report recording an average 24 percent increase in 2010 for the stock prices of the 215 biotechnology companies, which the Report tracked.

This compared to a 17 percent annual increase in the Nasdaq Composite Index and an 11 percent increase in value of the Dow Jones Industrial average for that year.

In the second half of 2010 the industry clearly benefited from a return of investor confidence.

As shown in the table below, the gradual rebound of both the general markets and the fortunes of large cap biotechnology companies and big pharma companies are clearly evident. For example, the NASDAQ Biotechnology Index has doubled in value since the BIO International Convention was last held in Chicago.

The fortunes of the leading biotechnology companies in this time period has been nothing less than spectacular with the share prices of Amgen Inc. (+104 percent), Gilead Sciences Inc. (+430 percent), Celgene Corp. (+107 percent) and Biogen Idec Inc. (+294 percent) exhibiting significant gains in their share prices.

Capital Market Performance

Since BIO 2012 public biotech companies have continued to remain hot with investors. Heading into BIO 2013, according to BioWorld Insight analysis, large biotech companies, with market caps greater than $1 billion, have collectively seen their share prices jump by an average of 22 percent while the Dow Jones Industrial average, which hit a new historical high in the first quarter of 2013, saw its value rise 13 percent in the same period. (See BioWorld Insight, April 1, 2013.)

Amgen and Gilead Sciences – biotech's top two companies by market cap – saw their share values grow by 33 percent and 50 percent, respectively.

It is not only biotechs that have enjoyed excellent public market results. The performance of pharmaceutical companies BIO 2012 to BIO 2013 reveals that there is indeed life beyond the patent cliff, with the Amex Pharmaceutical Index registering a 20 percent jump in value. Investors are obviously now looking beyond the effects of their "patent cliff."

For example, Pfizer Inc.'s Lipitor (atorvastatin) blockbuster drug went off patent in November 2011. Since it was approved in 1997, Lipitor has generated more than $130 billion in sales for Pfizer and comprised 20 percent of the company's total revenue, according to a Congressional Research Service (CRS) report on the impact of the pharmaceutical patent cliff. (See BioWorld Today, April 10, 2012.)

However, the pharma appears to have shrugged off this dramatic loss in revenue as reflected by an almost 28 percent increase in its share price since BIO 2012.

This performance is in line with a recently released report issued by Accenture, which says the negative impact of the patent cliff for pharmas peaked in 2012 and the company's research indicates that despite shifting global markets, pricing and reimbursement changes, and R&D productivity challenges, biopharma is entering a "new normal" which emphasizes among other things a focus on emerging markets. (See BioWorld Insight, Jan. 22, 2013.)

Accenture's biopharmaceutical industry study indicates that from 2013 onward, the negative effect from sales lost due to patent expiry will lessen, and sales from the drug pipeline and current portfolio will improve.

Looking for Venture Capital

Despite the excellent year enjoyed by public biotechnology companies in terms of raising equity and increased share values, the same cannot be said of private companies. Executives of these companies attending BIO 2013 will be hoping that they will get some indication that the environment for raising venture capital will begin to improve.

The evidence suggests that they will be disappointed. Worldwide, according to BioWorld Snapshots, private biotech companies developing therapeutics raised $403.5M in VC dollars in the first quarter of 2013, down a whopping 48 percent from the $775 million raised in the same period last year. (See BioWorld Insight, April 8, 2013.)

In addition, while the Fenwick & West LLP Life Science Venture Capital Survey, released last week, did find that in 2012 up rounds outpaced down rounds 52 percent to 17 percent, with 31 percent flat, the number of life sciences financings actually declined.

Their Life Science Venture Capital Barometer, which measures the change in share price of life science companies funded during the year compared with the share price of their previous financing round – showed an average price increase of 23 percent for 2012, in comparison to 14 percent for 2011.

Survey co-author Barry Kramer said in a statement that, "The Barometer results continued to trend modestly upward during 2012. However, the number of life science financings declined. This pattern suggests that while raising venture financing is becoming more difficult, those companies able to raise additional financing are doing so at an improved valuation."

No Biotech Bubble

Hallway discussions at BIO 2013 will certainly reflect on whether this extended bullish period for biotechnology can be maintained for the rest of the year or will it dramatically melt down – a situation that biotech has experienced before at the beginning of 2000.

According to Credit Suisse analyst Ravi Mehrotra writing in a research note, "We do not think that we are in a 'biotech bubble,' given that the drivers of the biotech sector's YTD performance are very different from those in '99/'00."

This will be welcome news for conference delegates. We certainly expect the mood of this year's event to be upbeat.

Editor's Note: The BioWorld editorial team will be providing comprehensive coverage of BIO 2013 in the daily issues of BioWorld Today.