Small-fry squashed

Small cap biotechs lost one-third of their value in 2011; big caps gained 8%

Among last year's best-performing large cap biotechs were an acquiree and an acquirer: HCV play Pharmasset Inc. and Valeant Pharmaceuticals International Inc. Other big cap stocks also did well overall, while investors abandoned their small- and microcap brethren in 2011.

Biotechs valued at less than $200 million as well as those with a $200-$499 million market cap shed almost one-third of their value on the year, while biotechs valued at $5 billion or more added 8% last quarter and on the year (see "Results by Market Cap").

Pharmasset rose 56% in 4Q11 after Gilead Sciences Inc. said it would acquire the HCV play for $11 billion. The shares popped 489% in 2011, having started the year valued at $1.5 billion. Just two years ago, Pharmasset was valued at only $586 million.

Valeant, which is building a specialty pharma business through M&A informed by sophisticated tax and accounting techniques, added 26% on the quarter and 65% on the year.

The company's hostile takeover bid for microcap Ista Pharmaceuticals Inc. drove the ophthalmic play's shares up 104% to $7.05, above Valeant's $6.50 per share cash offer. The offer totals about $327 million, after backing out Ista's debt.

Among the largest biotechs, Biogen Idec Inc. and Amgen Inc. were the big winners last quarter, gaining 18% and 17%, respectively.

Biogen Idec rose in October on Phase III data for BG-12 to treat multiple sclerosis and managed to hold on to most of the gain through year end.

Amgen ran up during a busy December in which it increased its quarterly dividend for 1Q12 to $0.36 from $.0.28; did a $5 billion share buyback; promoted President and COO Robert Bradway to CEO; promoted SVP of Global Development and CMO Sean Harper to EVP of R&D; and disclosed a biosimilar cancer antibody deal with Watson Pharmaceuticals Inc. (see " Elementary, Watson," A17).

Last year's highly anticipated launch stories fell to the bottom of the barrel when it came to performance last quarter. In the group valued above $5 billion, HCV company Vertex Pharmaceuticals Inc. was off 25%. In the $1-$4.9 billion segment, cancer immunotherapy company Dendreon Corp. shed 16%; pulmonary and fibrotic disease company InterMune Inc. lost 38%; and autoimmune, cancer and infectious disease company Human Genome Sciences Inc. fell 42%.

Another former superstar, Amarin Corp. plc, continued to decline last quarter, falling 19% amid ongoing patent issues. In early November, the U.S. Patent and Trademark Office issued a non-final rejection letter for a patent application covering hypertriglyceridemia treatment AMR101, which has a July 26 PDUFA date.

Salix Pharmaceuticals Ltd. was the top gainer last quarter in the $1-$4.9 billion group, adding 62%. It jumped on FDA draft guidance that would delay generic competition for Xifaxan rifaximin to treat travelers' diarrhea and on positive Phase III data for the opioid-induced constipation treatment oral methylnaltrexone. Salix has rights to the OIC product from microcap Progenics Pharmaceuticals Inc., which

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