Biotech Industry Improves in 2005

The worldwide biotechnology industry still loses money, but it lost less money in 2005 than it did the previous year. At the same time, the revenues of the world's publicly traded biotech companies grew 18% last year to reach a record $63.2 billion.

These conclusions are from the 20th edition of "Beyond Borders: The Global Biotechnology Report," which Ernst & Young is releasing at the Biotechnology Industry Organization's annual convention in Chicago this week. The report also coincides with the 30th anniversary of the formation of Genentech, the seminal biotech firm, in April 1976.

According to Ernst & Young, net losses at public companies last year decreased by an impressive 30% to $4.4 billion, as firms around the world launched new biotech products. In the U.S., net loss as a percentage of total revenue fell to 4% in 2005, the first time the ratio has dropped below 5%.

"The global biotechnology industry's revenues are growing at strong rates, product approvals are bringing innovative drugs to market, and the long-elusive goal of profitability is quickly approaching," says Donn Szaro, Ernst & Young's leader for the biotechnology and pharmaceutical sectors.

U.S.-based companies continue to command the lion's share of the biotech industry's revenues and R&D investment. The U.S. initial public offering (IPO) market was disappointing last year, however, and most companies failed to achieve the valuations they sought. Firms shut out of the public markets often turned to alliances or takeovers instead: Ernst & Young reports 205 U.S. mergers or acquisitions in 2005, up from 159 in 2004.

European biotech companies actually raised more money-$691 million-from IPOs in 2005 than did American firms. After years of restructuring, Ernst & Young says, European companies now have the advanced pipelines that investors seek. Asia-Pacific, meanwhile, was the only world region to be in the black last year, thanks to the strength of the Australian vaccines company CSL.