Ernst & Young took a look into biotechnology's crystal ball and came up with a world of opportunity and some troubling trends that could crimp a record run of new deals. Look for the ongoing convergence of biotech and big pharma, says the big accounting firm in its annual look at the global industry. And along the way, look for one or more near-term mega-mergers.
"One or more mega acquisitions of mature biotechnology companies along the lines witnessed with MedImmune--and nearly seen with Biogen Idec in 2007--is likely," says the report. The hunger to add more experimental therapies into the pipelines of mature developers will keep the most innovative biotech companies in the running for a wide variety of deals, says Ernst & Young. And that will make it a sellers market, with valuations running high.
Those trends will all keep biotech buffered from the worst effects of an economic downturn. The industry has long been a collective money loser, but with deal-making running hot and heavy, private investors are likely to take a long view in getting a return on their cash. Last year, says E&Y, biotechs raised $30 billion, including $5.5 billion in venture funds.
ALSO: It's not all good news for biotech, though. E&Y's Scott Morrison also notes that the ongoing slowdown of FDA approvals bodes ill for the industry, with growing pressure from lawmakers on high drug prices and a distinct fallout being felt from the subprime meltdown. And cooling public markets won't make life any easier for biotechs. Report