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The biotechnology markets in the United States, Europe, and Canada, and Australia reached aggregate profitability in 2009, according to Ernst & Young.
The biotechnology markets in the United States, Europe, and Canada, and Australia reached aggregate profitability together in 2009, for the first time in history, according to a recent report of the biotechnology industry by Ernst & Young. US biotechnology companies posted strong profits in 2009 despite a decline in revenues, and European biotechnology companies experienced lower net losses in 2009. Financing increased slightly in the US and European markets.
Companies in the industry’s established biotechnology centers of the US, Europe, Canada, and Australia had an aggregate net profit of $3.7 billion in 2009, an improvement over the $1.8-billion net loss that these markets suffered in 2008, according to the report. This improvement largely resulted from increased net profits in the US market, which largely stemmed from the adoption of cost-cutting and efficiency measures.
Overall, revenues of publicly listed biotechnology companies fell by 9% to $79.1 billion in 2009 from $86.8 billion in 2008. The bulk of this decline resulted from the exclusion of Genentech (South San Francisco, CA) from the list in 2009 because of its acquisition by Roche (Basel, Switzerland). If Genentech had been excluded from both years, industry revenues would have grown by 8%. Revenues of US public companies fell to $56.6 billion in 2009, a 13% drop compared with the 2008 level. When adjusting for the acquisition of Genentech, industry revenues increased by 9.5%, which was comparable to 2008 industry growth.
Although revenues at US biotechnology companies declined in 2009, profitability increased. The US biotechnology industry’s net income increased from about $400 million in 2008 to a record $3.7 billion in 2009. The improvement in the US biotechnology industry's profitability resulted from revenue growth, cost cutting, and a change in the accounting rules for acquisitions, according to the report. The 2009 figures exclude the net income of Genentech, which was acquired by Roche.
Tha amount of capital raised increased sharply in 2009. Companies in the US, Europe, and Canada raised $23.2 billion in 2009, a 42% increase compared with 2008. A significant portion of this capital was raised by a handful of established public companies in follow-on offerings, as access to capital for many companies remained scarce, according to the report. The value of merger and acquisition (M&A) transactions involving US-based biotech companies (excluding the Roche–Genentech transaction) decreased by one-half in 2009 to a total of $14.1 billion. Only three transactions had a value in excess of $1 billion.
The total amount of US capital raised by the industry increased by 39% in 2009 to an aggregate of $18.0 billion. Venture capital raised in the US reached $4.6 billion in 2009, the second-highest total in history, behind only the record $5.5 billion raised in 2007, according to the report.
Revenues of European public biotechnology companies increased 8% to EUR 11.9 billion ($15.5 billion), well below the 17% growth seen in 2008. The combined net loss for biotechnology companies in the region, however, fell from EUR 913 million ($1.2 billion) in 2008 to only EUR 288 million ($375 million) in 2009, because of cost cutting, the elimination of unprofitable companies, and strong net income growth at some large European biotechnology companies, according to the report.
The value of M&A activity in Europe declined from EUR 3.1 billion ($4.4 billion) in 2008 to EUR 1.8 billion ($2.3 billion) in 2009. Total funding for the European industry increased 48% in 2009 to EUR 2.9 billion ($3.8 billion). Venture capital raised in Europe totaled EUR 800 million ($1.0 billion), a 21% decrease from the 2008 level, and the lowest level since 2003.