The biotechnology industry has had a tricky start to 2008 but its first-half performance holds up pretty well when compared with big pharma and other sectors, according to the latest report from Burrill & Co.

Steven Burrill, chief executive of the life sciences group, says that with the first half of the year dominated by macroeconomic factors such as inflation, recession, credit market turmoil and escalating oil prices “it is not surprising that biotech initial public offerings were virtually non-existent” to date in 2008. However, the sector still managed to outperform the broader stock market indices.

“Investors have clearly gravitated to biotech’s elite companies and away from the traditional ‘safe havens’ of big pharma in these times of economic uncertainty,” Mr Burrill claimed. He added that “normally viewed as defensive, healthcare saw unusually high volatility in big pharma” and noted that shares of Merck & Co and Schering-Plough have fallen 35% and 26% in the first half of the year, while Pfizer is down 23%.

The American Stock Exchange Pharmaceuticals Index has declined over 14% in the first half of 2008 but, the report notes, “in biotech land it has been a different story”. Shares of Vertex Pharmaceuticals has posted a strong 40% quarter gain on the strength of positive clinical developments and sales outlook, while Amgen stock also recovered in the second quarter to post a 12% increase.

Despite 2008 “shaping up to be one of biotech’s worst in terms of IPOs,” Mr Burrill noted that “companies are resorting to other creative ways of financing in addition to these traditional and well established instruments”. For example, Exelixis obtained a flexible $150 million line of credit from healthcare hedge fund Deerfield Management and, CV Therapeutics sold half of the North American royalties it is due from partner Astellas for the newly-approved drug Lexiscan (regadenoson) to a private investment group, TPG-Axon Capital, which netted $175 million.”

Partnering deals also “picked up the pace” for US biotech companies, the report concludes. The most notable included a potential $770 million partnership between Astellas and CoMentis to develop products from the latter’s’ beta-secretase inhibitor programme. Also Avant Immunotherapeutics granted Pfizer an exclusive worldwide license to a therapeutic cancer vaccine candidate, CDX-110, in Phase II development for the treatment of glioblastoma multiforme. The deal could potentially be worth $440 million.