Ernst & Young's 2008 Global Biotechnology Report reveals robust investment
in the industry; sweeping trends that are transforming the industry
BOSTON, May 20 /PRNewswire/ -- The global biotechnology industry achieved record levels in financing and deal making in 2007, as investors and strategic partners showed strong confidence in the sector amid tightening global financial conditions that will continue to test the industry in 2008. These and other findings were highlighted in Beyond Borders: Global Biotechnology Report 2008, Ernst & Young's annual report on the trends shaping the biotechnology industry, released today.
"In 2007, investors were drawn to the tremendous value of biotech's
innovation, with impressive results, as venture financing and deal making
reached unprecedented heights," said Glen Giovannetti, Ernst & Young's
Global Biotechnology Leader. "To continue its multi-year track record of
progress, the industry must meet the current challenges of cooling public
equity markets, greater regulatory scrutiny and higher product approval and
reimbursement hurdles with fiscal discipline and the creativity and
innovation for which it is known."
Key industry findings described in the report include:
-- The global biotechnology industry had a very strong year on the
financing front. Companies in the Americas and Europe raised more than
US$29.9 billion -- a new high excluding the outlier genomics bubble
year of 2000.
-- Venture financing reached an all-time high in 2007 with investment
totaling about US$7.5 billion, fueled by a record total of US$5.5
billion in the US and 72% growth in Canada.
-- Global public biotechnology company revenue rose by 8% in 2007,
crossing the US$80 billion threshold for the first time. Absent the
acquisition of several leading biotech revenue producers by big pharma,
revenue would have increased by about 17% -- in line with the
industry's historical compound annual growth rate.
-- The global industry's net loss decreased from US$7.4 billion in 2006 to
US$2.7 billion in 2007. In the US, the industry came closer to
aggregate profitability than in any previous year.
-- Deal making reached new heights in 2007. In the US, the total potential
value of deals announced during the year -- including mergers,
acquisitions and strategic alliances -- was close to US$60 billion,
outdistancing all other years by a wide margin. In Europe, the total
potential value of such deals skyrocketed to about US$34 billion.
Commenting on the state of the European biotech sector, Juerg Zuercher, Ernst & Young's Biotechnology Leader for Switzerland and Central Europe said, "Today's European biotech industry is vastly stronger than it was just a few short years ago, with firms able to draw strategic buyers in droves and achieving remarkable growth in deal values, thanks to their maturing pipelines and rise in product approvals. As the industry faces a more difficult financing environment ahead, it will need to build on its enduring strength by translating its maturing pipeline into marketed products over the next couple of years."
While industry performance was strong on several fronts in 2007, emerging challenges have made the road ahead more difficult for many biotech companies. In the US, product approvals slowed, as safety concerns related to new and already approved products increased, and the US Food and Drug Administration (FDA) faced resource constraints. In the UK, growing pricing pressures brought the first-ever agreement by a company to refund a payor for the cost of treating patients that do not respond to its medication. In China, safety issues prompted a determined regulatory response. Meanwhile, the industry faces more stringent enforcement of numerous regulations -- from sales and marketing rules to the US Foreign Corrupt Practices Act.
New rules for a changing game: sweeping industry changes ahead
The Beyond Borders report examines three key trends that are transforming business models and the nature of competition for biotechnology and pharmaceutical companies.
Reinventing big pharma: As they face unprecedented patent expirations, pharma companies are trying to boost earnings by cutting costs and making deals. But the report points out that these approaches can only buy so much time -- longer term, pharma companies need to fundamentally reinvent their structures and incentives to improve the productivity of their innovation efforts. For biotech firms, the opportunity is to work collaboratively with big pharma, using creative business models that give them increased flexibility and a larger share of the value they help create.
The rise of personalized medicine: The adoption of personalized medicine is being hastened by business drivers such as pricing pressures and safety concerns. The Beyond Borders report predicts that personalized medicine will fundamentally alter the competitive landscape, changing the bargaining power of small and big drug companies and forcing firms to reassess traditional sources of competitive advantage.
Globalization: Similar to personalized medicine, globalization is
radically altering the traditional competitive advantages of pharma and
biotech companies. While the initial focus has been to lower drug
development costs, these financial gains will be temporary, according to
the report. The real opportunity is for western companies to work with
partners in emerging markets to develop innovative products suited
specifically for local market conditions.
Key regional findings
-- Revenues of public biotechnology companies in the US rose over 11% from
US$58.6 billion in 2006 to US$65.2 billion in 2007.
-- The US industry's aggregate net loss was under US$300 million -- less
than 0.5% of revenues and the closest it has come to overall
profitability in its history.
-- The US industry raised an all-time high of US$5.5 billion in venture
capital, about US$2 billion more than the previous record.
-- Approvals by the US Food and Drug Administration (FDA) for both
pharmaceuticals and biologics slid precipitously in 2007, with the
lowest number of new molecular entity (NME) approvals in over two
-- The European industry's revenues declined in 2007 because of the loss
of publicly listed biotech giant Serono, which was acquired by Merck
KGaA. Without this acquisition, public companies revenue growth would
have been 20%. After years of lackluster growth, the European sector is
sustaining robust financial performance.
-- The industry raised a total of euro 5.5 billion, an increase of 18%
from euro 4.6 billion in 2006.
-- The number of products in the clinical pipeline -- including those in
preclinical and clinical development -- increased by 9%, climbing to
1,712 in 2007 from 1,576 in 2006.
-- Asia-Pacific biotechnology industry revenues grew by 21% and net loss
declined by 98%, causing the industry to essentially break even. The
strong performance was driven by the Australian sector, where the
largest firm, CSL, had a very strong year.
-- There was a marked increase in IPOs, which brought in more than US$750
million. Eight companies went public in Australia and five Chinese
companies listed on US exchanges.
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 130,000 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 potential.
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|SOURCE Ernst & Young|
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