Navigation Links
Global Financial Crisis Making Biotech Business Model Unsustainable, According to Ernst & Young

Deep financing challenges separate haves and have-nots and accelerates move to sustainable models

BOSTON, May 5 /PRNewswire/ -- Despite worldwide economic turmoil, the global biotechnology industry delivered a solid financial performance in 2008, according to Beyond borders: Global biotechnology report 2009, Ernst & Young's 23rd annual report on the biotech industry. However, the prolonged and systemic funding drought is placing the business model that fueled biotech growth for the past 33 years under unprecedented strain. The report released today says that four sweeping, "paradigm-shifting" trends should lead to new, more sustainable ways of funding drug development: a wave of generic drugs based on today's top blockbusters, the expansion of personalized medicine, fundamental healthcare reform in the United States, and the continued globalization of the industry.

"This is not business as usual for the biotech industry," said Glen Giovannetti, Ernst & Young's Global Biotechnology Leader. "Unlike prior funding droughts, this crisis is systemic, deep and protracted. To thrive in this environment, firms will need to bring the creativity that has long been the industry's hallmark to establishing more durable models for funding innovation."

Key financial results;

  • Revenues of publicly traded biotechs grew 12% to US$89.7 billion in 2008. The global industry's net loss improved 53%, from US$3 billion in 2007 to US$1.4 billion in 2008. The US industry reached aggregate profitability for the first time.
  • Capital raised declined sharply in 2008. Companies in the Americas and Europe raised US$16 billion in 2008, a 46% decline from 2007. IPO funding fell 95% to US$116 million.
  • Biotech venture financing remained relatively strong, falling only 19% from 2007's all-time record to about US$6 billion in 2008.
  • Industry deal making remained brisk. The total value of M&As involving US biotechs reached more than US$28.5 billion -- a record high when adjusting for "megadeals" that took place in prior years. In Europe, M&A transactions totaled US$5 billion.

"Like firms in most markets, European biotechs were clearly impacted by the financial crisis," said Jurg Zurcher, Ernst & Young's Biotechnology Leader for Europe, Middle East, India and Africa. "Many are scrambling to raise capital, restructure operations and use deals creatively to survive. Consolidation seems inevitable."

New pathways to sustainability

The challenge for the industry, according to Beyond borders, is turning an existential threat into a Darwinian opportunity. The potential solution lies in four paradigm-shifting trends that promise to accelerate the transition to sustainable business models:

Generics: Generics based on today's top blockbusters should loosen governments' and insurers' budgetary constraints and mitigate pricing pressures on innovative drugs, permitting better margins.

US healthcare reform: The potential shift toward universal healthcare coverage in the world's largest drug market will likely incorporate pay-for-performance in reimbursement decisions. Incentives for true innovation should help biotechs sustain returns.

Personalized medicine: Personalized medicine will increase the relative value of research and early development -- biotech's traditional strengths -- giving biotechs more bargaining power and better valuations. Meanwhile, more efficient drug development will lower R&D costs, making it easier for firms to make the journey to self-sufficiency.

Globalization: Growing strengths in emerging markets will facilitate creative solutions -- from new "win-win" ways of allocating increasingly valuable ex-US rights to creative alliances and new sources of capital. Meanwhile, Asian business models could provide solutions for struggling Western firms.

"But these trends will also bring new market pressures -- from a higher bar on reimbursement to new sources of competition. To seize the opportunities in these four drivers, companies need to be proactive," says Giovannetti. "Firms should understand how these trends impact them, prepare for them, and where possible, help shape them."

Key regional findings

United States

  • Revenues of US public biotechs grew by 8.4% in 2008, down from 11.3% in 2007.
  • The US publicly traded industry posted an aggregate net profit for the first time -- US$0.4 billion.
  • Despite the crisis, venture capital raised in the US reached US$4.4 billion in 2008 -- the second-highest total in history, behind only the record US$5.5 billion raised in 2007.


  • Revenues of European public biotechs increased 17% to euro 11.2 billion.
  • Capital raised by European biotechs fell from euro 5.5 billion in 2007 to less than euro 2 billion in 2008.


  • Asia-Pacific biotech revenues grew by 25% in 2008, led by strong growth in Australia.
  • In Australia, public-equity funding fell to levels not seen since 2002. There were a handful of IPOs in Japan and China and strong private-equity funding growth in India.

About Ernst & Young's Global Biotechnology Center

Today's rapidly changing biotechnology industry is delivering new levels of health, prosperity and sustainability. But it is also facing unprecedented challenges. Ernst & Young's Global Biotechnology Center brings together a worldwide team of professionals to help you achieve your potential - a team with deep technical experience in providing assurance, tax, transaction and advisory services. The Center works to anticipate market trends, identify the implications and develop points of view on relevant industry issues. Ultimately, it enables us to help you meet your goals and compete more effectively. It's how Ernst & Young makes a difference.

About Ernst & Young

Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 135,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential. For more information, please visit

Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

This news release has been issued by EYGM Limited, a member of the global Ernst & Young organization that also does not provide any services to clients.

SOURCE Ernst & Young
Copyright©2009 PR Newswire.
All rights reserved

Related biology technology :

1. Global Experts Explore Entire Spectrum of Aids Vaccine Development
2. Mindray to Present at Merrill Lynch Global Pharmaceutical, Biotech & Medtech Conference
3. Advanced Life Sciences to Present at 2007 UBS Global Life Sciences Conference
4. Touching 418 Billion Lives, Hepatitis Still Presents Significant Threat to Global Health
5. Touching 418 Million Lives, Hepatitis Still Presents Significant Threat to Global Health
6. Clinsys Clinical Research, Inc. Announces Key Hires, Rajagopalan Srinivasan, Ph.D, to Strengthen Global Biostatistics Service Offering and Christopher Gregory, Ph.D, to Scientific Affairs
7. Jazz Pharmaceuticals to Present at UBS Global Life Sciences Conference
8. A Large-Scale Research Project by a Dutch Consortium Addressing a Global Problem
9. Amicus Therapeutics to Present at the Merrill Lynch Global Pharmaceutical, Biotech & Medtech 2007 Conference
10. Allos Therapeutics to Present at the 2007 UBS Global Life Sciences Conference
11. Merrill Lynch Global Pharmaceutical, Biotech and Medtech Conference to Webcast Millennium Presentation
Post Your Comments:
(Date:11/25/2015)... ... November 25, 2015 , ... ... of Black Aerospace Professionals (OPBAP) has been formalized with the signing of a ... leaders met with OPBAP leaders Capt. Karl Minter and Capt. Albert Glenn Tuesday, ...
(Date:11/24/2015)... Malaysia , Nov. 24, 2015  Asia-Pacific ... contract research organisation (CRO) market. The trend of ... in lower margins but higher volume share for ... capacity and scale, however, margins in the CRO ... Organisation (CRO) Market ( ), finds ...
(Date:11/24/2015)... VANCOUVER , Nov. 24, 2015 /CNW/ - iCo ... ICOTF), today reported financial results for the quarter ... are expressed in Canadian dollars and presented under ... the United States ," said Andrew ... "These advancements regarding iCo-008 are not only value ...
(Date:11/24/2015)... Inc., a worldwide provider of clinical research services headquartered in ... has set a new quarterly earnings record in Q3 of 2015.  ... Q3 of 2014 to Q3 of 2015.   ... the establishment of an Asia-Pacific office to ... and Mexico , with the establishment ...
Breaking Biology Technology:
(Date:11/17/2015)... Calif. , Nov. 17, 2015  Vigilant Solutions ... has joined its Board of Directors. ... Board after recently retiring from the partnership at TPG ... 107 companies with over $140 Billion in revenue.  He ... improvement across all the TPG companies, from 1997 to ...
(Date:11/12/2015)... BOSTON , Nov. 12, 2015  A golden ... for Duchenne muscular dystrophy (DMD) has provided a new ... Boston Children,s Hospital, the Broad Institute of MIT and ... Brazil . Cell, ... some dogs "escape" the disease,s effects. The Boston Children,s ...
(Date:11/11/2015)... Nov. 11, 2015   MedNet Solutions , an innovative ... clinical research, is pleased to announce that it will be ... (PCT) event, to be held November 17-19 in ... view live demonstrations of iMedNet , MedNet,s ... iMedNet has been able to deliver time and ...
Breaking Biology News(10 mins):