Fundamentals Favorable in Global Biotechnology Industry
Boston, MA (May 8)—The global biotechnology industry showed several positive signs in 2006, including increases in overall revenues and financing,
although the industry as a whole continues to operate at a loss, according to Ernst & Young's (New York, NY,
http://www.ey.com/) annual analysis of the biotechnology industry. Its report, "Beyond Borders 2007," was issued at the Biotechnology Industry
http://www.bio.org/) annual conference and exhibition, which was held in Boston May 6–9.
The global biotechnology industry posted revenues (based on revenues of publicly traded companies) of $73.5 billion in 2006,
a 14% gain over 2005. The United States accounted for 75% of total revenues or nearly $55.5 billion, and Europe accounted
for $11.5 billion. On a global basis, the total number of publicly traded companies increased 5% to 710 in 2006, with 336
companies in the US and 156 in Europe. The total number of public and private companies increased modestly, 0.3%, on a global
basis to 4275, with 1452 of those companies in the US and 1621 in Europe.
Other fundamentals were strong. Capital raised on a global basis increased 42% to $27.9 billion, the largest amount raised
since 2000. Venture capital reached $5.4 billion, an all-time high in the global biotechnology industry, with gains of 38%
in the US and 47% in Europe.
Strong competition, particularly among pharmaceutical buyers, contributed to healthy merger and acquisition (M&A) activity
in 2006. The average premium in M&A transactions with values over $500 million increased to 60% in 2006, more than twice the
average M&A premium from 2003 to 2005.
"In many ways, 2006 was the year of the deal—but this is all the more remarkable because there was no one deal of the year,"
said Glen Giovannetti, Ernst & Young's global biotechnology leader, in a company release. "In prior years, high deal values
were typically driven by a single mega deal, but in 2006 we now have widespread recognition among buyers of the potential
value in biotech's platforms and pipelines."
In a reversal of recent trends, deal activity in 2006 showed that pharmaceutical buyers gravitated toward early-stage platforms
US biotech industry moves to profitability
The revenues of publicly traded US biotech companies grew 14.2% in 2006 to $45.3 billion—below the 2005 growth rate and the
industry's historic compound annual growth rate, according to the Ernst & Young report. The industry's revenues were lowered
by two significant acquisitions—Novartis's (Basel, Switzerland,
http://www.novartis.com/) acquisition of Chiron and Abbott Laboratories' (Abbott Park, IL,
http://www.abbott.com/) acquisition of Kos Pharmaceuticals (Miami, FL,
http://www.kospharm.com/)—which reduced the industry's revenues by $2.5 billion. Without these acquisitions, revenues would have grown by 20%.
The US biotech industry posted a net loss of nearly $3.5 billion in 2006, a 151% increase over 2005, when it recorded a net
loss of $1.4 billion. This increase was attributable to large acquired in-process research and development (IPR&D) charges
related to certain acquisitions, explains the report. Factoring out the impact of these deal-related charges, which totaled
in excess of $4 billion for the industry, the publicly traded US biotech industry would have shown an aggregate net profit
for the first time.