Sector Snap: Biotech outpaces pharma cousins

On Tuesday, IMS Health, which tracks the pharmaceutical market, said 2007 sales of biotech drugs rose 12.5 percent to more than $75 billion as the market counted 22 blockbuster biotech drugs. In 2002, there were only 6 blockbusters, or drugs with annual sales of more than $1 billion.

IMS said increased competition and stricter regulation will likely cause growth to moderate through 2012, but it expects the sector to remain "one of the most robust" market segments.

Biotech drugs, or drugs made from the cells of living organisms, have driven the success of companies including Genentech Inc., Biogen Idec Inc. and Amgen Inc. But more pharmaceutical makers, or companies who had been focusing on molecular-based treatments, are getting into the game. In 2007, for example, both Roche Holding Ltd. and Merck & Co. separately agreed to pay $1 billion for the rights to research certain biotech drugs designed to silence genes that trigger certain diseases.

Overall, biotech stocks have performed better than their large pharma peers since the beginning of the year. The American Stock Exchange's biotechnology index, which tracks several bellwether biotech companies, is down about 4 percent since Jan. 1, compared with a 14.9 percent dip for the pharmaceutical index. Biotech is also performing better than the overall market, with the Dow Jones industrial average, Nasdaq composite and S&P 500 indexes all down more than 6 percent for the year to date.

South San Francisco-based Genentech, which sells the blockbuster cancer drug Avastin, has outpaced both the sector and broader market, with shares gaining more than 12 percent since Jan. 1. Shares of Cambridge, Mass.-based peer Biogen Idec are up about 4 percent. Thousand Oaks Calif.-based Amgen, which has experienced a sales decline because of safety and reimbursement issues over its anemia drugs Epogen and Aranesp, has lost 4 percent year-to-date.

The increased push to develop more biotechnology-based therapies can be seen in the annual BIO conference opening Tuesday in San Diego. In addition to large- and small-cap biotech companies, the three-day conference will also host presentations from big pharma heavyweights like Pfizer Inc. and GlaxoSmithKline PLC.