Biotech firms hit as cash dries up and research shifts eastward
Monday 08 November 2010
The global biotechnology business model is "breaking down" as investors tighten purse strings and the industry's research base shifts to emerging economies, a report suggests.
Last year, biotech companies in Europe managed to raise just $1.1bn (£678m) in venture capital – the lowest haul since 2003. The auguries are also dim: 84 per cent of the participants at a recent biopharmaceutical conference in Monaco view funding as the industry's prime challenge.
Historically, the biotech industry has relied on external investment to develop innovative ideas that have often sprung from the world of academia. Investors dug into their pockets in the hope of cashing in by floating biotech firms or selling new therapies to established players in the pharmaceuticals sector.
But the business model is risky and many investments end up in the red. A report by the accountant PricewaterhouseCoopers cites a recent study of 1,606 biotech investments realised between 1986 and 2008. Of these, 704 resulted in a full or partial loss and 16 managed only to cover their costs.
The gross rate of return on these investments stood at nearly 26 per cent, well above the pooled average return of 17 per cent on all venture capital invested over the period. But the net rate of return was less than 16 per cent when costs and the impact of unrealised investments were factored in to the figures.
PwC said that while biotechnology companies had produced some valuable medical treatments, they had failed to reduce the risks inherent in the discovery and development of new drugs. "Biotech companies don't develop new medicines much more quickly or economically than pharma companies do," says the report, which is published today.
Moreover, it adds that many of the external conditions that supported the industry's success stories are "rapidly vanishing". One the one hand, investors who have been battered by the recent economic slump have become more cautious. On the other, the research base is shifting, with emerging economies competing more aggressively.
Between 1998 and 2006, for example, the number of students graduating with doctorates in the physical and biological sciences grew by 43 per cent in India. China was even further ahead, with 222 per cent growth. Besides rising numbers of doctoral students, both India and China have benefited from the return of about 100,000 of their highly-skilled expatriates from the US. Another 100,000 are expected to follow in the next five years.
These trends are supplemented by local investment. China has pumped $9.2bn into technological research and development, including biotech, in the past 18 months, while India is looking at plans to become one of the world's five producers of biosimilars (cheap copies of biotech medicines) by 2020.
- 1 I was a Woman Against Feminism too
- 2 Is Gideon Levy the most hated man in Israel or just the most heroic?
- 3 Students offered grants if they tweet pro-Israeli propaganda
- 4 The Tory donor whose firm is one of Britain’s biggest tax avoiders - with HMRC's blessing
- 5 John Barrowman praised for Commonwealth Games opening ceremony gay kiss
Vladimir Putin employs a full-time food taster to ensure his meals aren't poisoned
Peaches Geldof: Her final day – and her fatal decision
Students offered grants if they tweet pro-Israeli propaganda
Israel-Gaza conflict: Israel may have committed war crimes, says UN human rights chief
Peaches Geldof inquest: Tragic final days of mother-of-two's life reveal she lied to husband about failed heroin tests
Malaysia Airlines MH17 crash: Vladimir Putin is given 'one last chance' to end hostilities in Ukraine
The 'scroungers’ fight back: The welfare claimants battling to alter stereotypes
The truth about conspiracy theories is that some require considering
Malaysia Airlines MH17 crash: Ukrainian military jet was flying close to passenger plane before it was shot down, says Russian officer
Malaysia Airlines MH17 crash: Massive rise in sale of British arms to Russia
Malaysia Airlines MH17 crash: victims’ bodies bundled in black bags and loaded onto trains
iJobs Money & Business
competitive: Progressive Recruitment: This really is a fantastic chance to joi...
£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...
£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...
Negotiable: Harrington Starr: Market Administrator (1st line Support, Bloomber...