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Outlook for Biotech Industry Mixed in 2008

Written by on Saturday, May 24th, 2008 Print This Post Print This Post

The biotech industry may run into problems in 2008, despite having a banner year in 2007, according to a report by SF Gate.

The SF Gate reported:

[B]iotech companies may face some rough weather ahead, said Scott Morrison, Ernst & Young’s U.S. life sciences director. New product approvals will slow as drug regulators scrutinize applications in the post-Vioxx era, Morrison said.

Drug prices may face more pressure in a political environment focused on health care reform and the federal budget deficit. Beyond that, constriction in the larger capital markets has finally started to affect biotech companies this year, he said.

"Biotech has not been immune from the ills of the subprime mortgage meltdown," Morrison said. "Total fundraising year to date in 2008 is down by 60 percent."

Yet, according to a recent Ernst & Young report, biotech had a record year in 2007.  The Jacksonville Business Journal wrote of fthe findings from this report as follows:

European and American companies raised nearly $30 billion in overall financing in 2007, a banner year only surpassed by 2000.

Global venture financing reached a new high in 2007, surpassing $7.5 billion, of which $5.5 billion helped seed or nurture companies in the United States.

Global biotechnology net losses were at $2.7 billion as of 2007, down from $7.4 billion in 2006.

Ernst & Young has also concluded that the U.S. biotechnology sector is almost profitable for the first time. 

 As a result of a good 2007, the tight economy is not expected to hit the biotech industry as hard as is expected in other industries.  According to SF Gate, the Ernst & Young report indicated that nearly half of the 386 publicly traded U.S. biotechnology companies have more than two years of cash on hand, and another 27 percent have more than five years of cash. In addition, venture capitalists remain interested in biotech–more so than in other industries.

All in all, the SF Gate article suggests that the outlook is mixed for the biotech industry in 2008; however, I think that those of us working in the industry would agree that we are not overly worried about the industry’s future.  I think that it is safe to say that the future remains very bright for biotechnology.

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