Too Early to Call A Biotech Turnaround? Maybe, Maybe Not...

The amount of money raised by biotech companies so far this year has finally, for the first time in 2009, exceeded the amount raised year-to-date in 2008.

According to data from BioWorld Insight, biotechs raised $5.9 billion through June 4 this year, compared to $5.4 billion in the same period last year.

That may not sound like much of a difference, but consider the hole biotech had to dig itself out of: at the end of the first quarter, fundraising was off by nearly a third compared to last year, by BioWorld's numbers.

What's really interesting is that the recovery was driven by a huge surge in May public offerings. Cumulatively, public offerings still represent the smallest slice of the fundraising pie this year (compared to private financings and alternative financings like PIPEs, debt, registered directs, etc.). But the $1.1 billion raised through public offerings in May more than doubled their take in January through April combined.

That means public investors are buying biotech again.

Whispers are starting to circulate on Wall Street. No one wants to jinx it, but a banker I spoke with said financing discussions are definitely on the rise, and an institutional investor echoed the same.

There are other positive signs as well: Johnson & Johnson's recent $1 billion acquisition of Cougar Biotechnology, the FDA's surprise approval of Vanda Pharmaceuticals' Fanapt (iloperidone), a post-ASCO stock bump for several cancer companies-- not to mention a "glimmer" of an upward trend for biotech stocks, according to Burrill & Co. CEO G. Steven Burrill.

But don't call it a comeback yet.

In a BioWorld Insight article this week, Ernst & Young's leader of global biotechnology, Glen Giovannetti, said there isn't yet a trend and reminded folks that "about half the industry is still staring at having less than a year of cash." Michael Latwis, analyst with Decision Resources, agreed "the jury's still out" on whether the biotech sector is starting to rise again.

The article goes on to say:

Gautum Jaggi, senior manager with Ernst & Young and author of the Beyond Borders 2009 report on biotechnology, said the economic world is "maybe not at the beginning of the end [of the crisis], but maybe the end of the beginning. It feels different, in terms of the overall market sentiment a few months ago." The return to normal will come, he said, but it will be a "return to a new normal," a leaner one, he said. "There will need to be a broader recovery, and biotech will lag that rather than lead it."