Biotech sector hit by market climate fears

The market volatility that followed the terrorist at-tacks in the US at the beginning of September has had a significant adverse effect on the biotechnology industry.

US life sciences merchant bank Burrill & Co reports that market capitalisation for the industry was US$305bn for the month of September, the lowest it has been since April last year and down 32% on the comparable period in 2000.

Chief executive Steven Burrill commented, 'Everyone wants to know if we've hit bottom yet. However, while volatility still characterises the market, much of the economic dislocation that is happening is now factored into the market and biotech's fundamentals remain in place.'

However, m&a activity in the pharmaceutical sector has grown in the first half of 2001, bucking a trend that has seen most other sectors experience a significant decline, according to an analysis by PwC. Data suggest that pharmaceutical deal activity rose over the first half of the year both in terms of the number of deals – 165 from 152 – and value, which rose to $27bn from $6bn, excluding the $76bn combination of GSK. PwC said that although most industries have experienced a 25% downturn in m&a activity, deals in the pharmaceutical sector have grown by 9%. The firm said that the pharmaceutical sector traditionally does well because of the underlying demand for drugs, which is relatively insensitive to economic conditions.

Europe has emerged as the most active continent during the first six months of the year, with 62 deals, but with the exception of Novartis acquiring 20% of the voting rights in Roche, none of the top 10 deals involved a European company as either target or acquirer.