Biotech Industry Turns a Profit for the First Time, But Milestone Overshadowed as Companies Struggle for Survival, Report Finds
February 25, 2009
San Francisco - February 25, 2009 - Biotech 2009 - Life Sciences: Navigating the Sea Change, the 23rd annual report on the biotechnology industry, released today, officially records that after 40-plus years since the industry began it finally turned a profit in 2008. Yet this "good news" story has been overshadowed by the events that besieged the industry in the final four months of the year.
"As our Biotech 2009 book title says a sea change has occurred," explained G. Steven Burrill, CEO, Burrill & Company, and author of the latest edition of the most respected and widely read global analysis of the industry. "Financing and investor confidence in biotech's hopes and dreams has helped spawn many world-class biotech ‘powerhouses' such as Amgen and Genentech and these two companies are a big reason why the industry turned a profit in 2008. But majority of the industry's companies are still a ‘work in progress' whose umbilical cord is cash to fuel product development.
"After having 40-plus years of relatively easy access to cheap capital, the "rules of the game" changed with the permanent restructuring of the capital markets making capital more difficult and expensive to secure. "The implosion of financial institutions severed this cord and, as a result, it has left many emerging private and public global biotech companies on ‘life support' with limited cash resources to keep their doors open, added Burrill.
Biotech 2009 reveals dramatic evidence just how quickly the financial crisis affected majority the 370 publicly-listed biotechnology companies analyzed by the report.Almost 60 percent saw their market cap fall to well below $100 million. In addition, it identified over 100 North American public and private biotech/pharma companies that announced a corporate restructuring by slashing staff and putting promising projects on ice.
"We started to see a clear pattern evolving for these companies in the final quarter of last year," commented Burrill. "Companies were shrinking to conserve cash and extend their runway. The more mature and blue chip biotech companies weathered this period quite well since they have plenty of cash, product revenue streams, strong pipelines and big pharma partners. Investors viewed these large cap companies as safe havens, which is why a 10 percent drop in the Burrill Biotech Select Index, during 2008 can be viewed in a positive light when set in context of the Dow falling 35 percent and the NASDAQ falling 42 percent in the same 12 month period.
Biotech 2009 predicts this sea change, both for the buy side and the sell side of Wall Street, means a challenging next 18 months as the industry come to terms with an environment that is largely unfamiliar. It will be a very painful time for many as companies are forced to make difficult choices as they restructure and refocus. When the markets do return the industry will look very different. Many company obituaries will have been written. Biotech 2009 is not pronouncing the industry's demise. However, it describes a very different industry than exists today. Although different, the report says that a better industry will evolve from these turbulent times.
Navigating the changes
Biotech 2009 also offers some sound advice on potential strategies that will be needed to be one of the companies that will still be around when conditions do improve including:
- The need for executives to accept that the biotech world has changed - don't hold on to the notion that the "good old days" will return - they are gone forever. You now have to put your businesses in "survival" mode.
- Remove the word "dilution" from your vocabulary...cash is going to be expensive to access but you need it, so go for it.
- There needs to be a fundamental shift in the approach to healthcare to rein in costs - from treating sickness to promoting wellness.
- BioGreenTech - the revolution is here. Figure out how your products and technology can be part of it.
- The fields of biomarker research and translational research are booming globally because biotechnology and pharmaceutical companies are looking to biomarkers to help them increase R&D productivity and clinical trial success rates. This is where the action will be at all stages of the drug development process.
- There is increasing emphasis on translational research in biomedicine, together with the cross-fertilization of such fields as biotech, nanotech and information technology. They represent fabulous new business opportunities because of the promise of innovative solutions for disease prevention, screening, diagnosis, therapy, monitoring and management.
- Buying opportunities - best ever
The industry - by the numbers
The report contains over 400 charts and tables providing a detailed analysis on the financings, partnering and M&A deals globally. For example, at the end of 2008 in the U.S.:
- 356 biotech companies were public
- 44 had a market cap greater than $1 billion
- 120 companies were trading with less than six months of cash on hand (A jump of 90 percent over 2007 figures)
- 22 Biotechnology/Medical Device IPOs pulled in 2008
- In terms of biotech IPOs, 2008 was one of biotech's worst in history with only one completed
- Financings and partnering deals collectively brought in $30 billion for US companies in 2008 with over $10 billion through financings and $20 billion in partnering capital.
Profile of a global industry
The 470-page Biotech 2009-Life Sciences: Navigating the Sea Change 23rd annual report on the state of the biotech industry, highlights the critical developments in 2008 (across all sectors, not just human healthcare but also biogreentech, both in the US and globally). It profiles the global reach of biotechnology and analyzes the business, financial, political and regulatory issues impacting the industry. It also describes that the changing world of healthcare innovation and delivery, and the increased concern for global climate change, energy security and environmental sustainability are the major issues that will make 2009 very challenging as we come to terms with a business, policy and economic environment that is largely unfamiliar to us all.
Available in PDF (February 24, 2009) and paper (March 20, 2009) formats.
Contact: Peter Winter, Burrill Report, Editor [email protected]
About Burrill & Company
Founded in 1994, Burrill & Company is a San Francisco-based global leader in life sciences with activities in Venture Capital, Private Equity, Merchant Banking and Media. The Burrill family of venture capital funds has over $950 million under management and its merchant banking business is one of the industry leaders in life sciences transactions. Burrill is also the creator, sponsor and facilitator of over a dozen leading industry conferences worldwide and publisher of a range of bio-intelligence reports including the bi-monthly Burrill Report and annual "State of the Industry" report.