Biotechnology Seen Coming of Age

Biotechnology ventures are more than undertakings by individual companies; they involve a global network of competing regions and alliances, according to Ernst & Young's 19th annual global biotechnology report, "Beyond Borders.."

The number of cross-border alliances between biotech companies rose from 421 in 2003 to 480 in 2004, the report says. The "don't fence me in" philosophy is said to be fueled by factors including competition, drug price pressures, varying funding opportunities, and regulatory environments.

Biotechnology includes not only health care. Just as biotech has "reinvented a 160-year-old pharmaceutical industry," the report says industrial biotech has the potential to "shake up" chemicals and industrial manufacturing.

Although agricultural biotech has attracted opposition from environmental groups, the report points out that "one of industrial biotech's biggest selling points" is that its manufacturing processes often use less energy and generate less waste.

Global biotechnology industry revenues grew by 17% in 2004 to $54.6 billion, led by the U.S. with $42.7 billion in revenues. Michael Hildreth, Ernst & Young's biotechnology sector director, writes that U.S. biotech has come of age, leaving behind a "pattern of boom and bust cycles" to reach the "maturity, focus, and rationality of an accomplished adult."

After a five-quarter "drought," companies began to go public again in late 2003. The global biotech industry raised a total of $21.2 billion in capital last year, the report finds, 15% more than in 2003.

In the U.S., according to Ernst & Young, venture capital for biotechnology reached an all-time high in 2004, accounting for more than 21% of all venture investments. The biotech sector is gaining financial respect. Yet a gap remains: Early-stage companies still struggle for seed financing, and governments frequently step in to bridge the divide.