Funding for research and development has grown increasingly scarce for a majority of firms in the global biotechnology sector, says a study.
This has put more pressure on the traditional biotech business model and may reshape how companies pursue R&D, says Ernst & Young?s 25th annual report on the biotech industry.
While the biotech industry?s aggregate performance improved in 2010, there is now a widening gap between large, established companies and nascent ones which continue face difficulties in raising capital, the report says.
In the US, large debt financings by mature, profitable companies grew by 150% in 2009. Conversely, there was a 20% decline in the amount of innovation capital for the sector, defined as total funding minus large debt financing. About 82.6% of the funding went to just 20% of companies, up from 78.5% in 2009. The bottom 20% of the companies raised 0.4% of funds, down from 0.6% in 2009. Besides, upfront payments from partners to biotech companies dropped 37% to $3.1 billion.
Moreover, M&As involving European/US biotech firms dropped sharply from 58 deals in 2009 to 45 deals in 2010, while the aggregate value of these transactions remained relatively flat. Also, biotech firms face increased competition from other sectors for a smaller pool of venture capital.
