Biotech Sees Signs of Hope, Causes for Concern

So says London-headquartered Ernst & Young (www.ey.com)—a global assurance, tax, transaction and advisory services provider—in its welcome message to its 26th annual issue of “Beyond Borders,” a report on the global biotechnology industry.

One sign of hope: stabilized revenues. “Companies in the industry’s established biotech centers—U.S., Europe, Canada and Australia—achieved revenues of $83.4 billion in 2011, a 10-percent increase from 2010 on a normalized basis, after adjusting for the acquisition of three large U.S.-based biotechs by non-biotech buyers,” the company’s June 9, 2012, press release states.

Another sign: research and development (R&D) rebound. “The industry grew R&D by a healthy 9 percent—on a normalized basis—in 2011,” Ernst & Young says.

However, “overall industry funding explodes, but ‘innovation capital’ stays flat,” the company reports. “Biotech companies raised a staggering $33.4 billion in 2011.”

But the $16 billion of capital raised by the rest of the industry – which Ernst & Young calls innovation capital – reflected little change from recent previous year, the company states. Initial-public-offering (IPO) buyers’ purchases slumped in 2011, to 16 IPOs and total proceeds of $857 million, compared to $1.3 billion in 2010, Ernst & Young says.

And while merger and acquisitions (M&As) were up, “big pharma [was] largely absent,” observes Ernst & Young. M&As involving either European or U.S. biotech firms increased to 57 in 2011 from 49 in 2010, though big pharma was the buyer in only seven of those, the company notes. “[This is] a potentially troubling trend given pharma’s critical role in supporting biotech innovation.”

C. Kenna Amos, [email protected], is an Automation World Contributing Editor.