What's really happening in biotech?
Peter Winter, editor of the Burrill Report, in a recent interview announced that, 40 years after it was established, the US biotechnology industry has turned a profit. This is a significant stat since it may help dispel the argument that biotech is a zero sum game with the earnings generated by the industry being no greater than the amount of investment it has received.
Crunching the 2008 numbers for the 360 publicly-listed US biotech companies, the group’s net income was approximately $3 billion. Sounds good, but does this indicate the industry is healthy as a whole?
Well, the true story is a bit less rosy. Only 67 of the 360 companies turned a profit. Furthermore, three companies (Genentech, Amgen and Gilead) were responsible for the lion’s share of the profits (about $8 billion).
The non-profitable majority lost a total of $6 billion in the same period.
Winter predicts that the non-profitable companies will need to continue cutting jobs and slashing programs in order to survive the financial nuclear winter which he believes will continue for another 12-18 months.
Looking ahead, Winter believes the industry will contract by about a third, but the survivors will have stronger value propositions than at present, perhaps as a result of a wave of M&A.
As if there was any doubt, the FIBCO model (fully integrated biotechnology company) appears to be unattainable for smaller companies. The limited community of “haves” will continue to be strong and profitable and the burgeoning community of “have nots” will need to carefully choose programs that have high potential and low risk – no mean feat.
Listen to the interview with Peter Winter here.
Or read more here.
John provides assistance to life sciences entrepreneurs in business strategy, management, intellectual property, financing and licensing.
