Driving self-sustaining growth of biotechnology across Europe

The UK industry – Europe’s most mature – is focusing on continued growth and success.

The Global Biotechnology Report 2006

The European biotech sector is “back on track” after a funding drought that was sparked by the bust of the internet dot.com companies.

In 2005 the sector’s performance, both in the UK and the rest of Europe, was better on several fronts, from an improving initial public offering (IPO) market, to a significantly stronger overall financial performance.

These were the findings of Ernst & Young’s 20th annual survey of biotechnology published in April 2006.

Improved financial performance

Four years of consolidation and restructuring, and a focus on products, finally paid dividends in 2005.

Revenues of Europe’s public companies increased by 17 per cent, compared to a 5 per cent decrease in 2004.

At the same time, market capitalisations rose by 26 per cent.

R&D on the rise

Meanwhile, after shrinking 3 per cent in 2004, R&D expenditure was up by 22 per cent for publicly-traded companies, and 15 per cent for the sector as a whole.

On average, public companies invested one third of total revenues in research.

UK leads in drug development

In drug development, the UK “dominated the scene,” says the report.

Of 84 compounds in Phase III, 36 were from UK companies; in Phase II, of 158 compounds, 72 were being developed in the UK; while for Phase I the figure was 39 out of 85.

Similarly, of seven products granted marketing approval in 2005, three were developed by UK companies.

And the UK can expect to have a significantly higher number of approvals in 2006, as seven of the 14 drug applications awaiting approval currently are from the UK.

The market’s appetite for IPO returns

A significant increase in the number of IPOs means the European biotech sector now has 122 quoted companies.

This is an increase of 22 per cent during 2005, and an all-time high for the sector.

Indeed, 2005 was the best year for financing in the history of the industry in Europe, save for the genomics bubble year of 2000.

The UK led the IPO stakes with seven listings out of 23 in total.

Europe and UK ahead of USA

And for the first time in the 30-year history of the sector, there were more public offerings in Europe, with 23, than the USA, with 13.

While the post-IPO performance was mixed, it was far better than that of previous years, says Ernst & Young.

Again, the UK and Europe were ahead of the USA.

At the end of the year, 65 per cent of European companies that went public during 2005 were trading at, or above, the IPO price – with an average premium of 28 per cent.

Alliances on the up

The UK also had Europe’s largest share of the strategic alliances agreed in 2005, with several examples of big pharmas’ appetite for collaborating with innovative UK biotech companies in promising areas of science.

The underlying strengths of the UK sector enabled it to maintain momentum in the downturn, and then to lead the way out of the dip.

As the report concludes, “With government support, strategic partnerships and restructuring, the UK industry – Europe’s most mature – is focusing on continued growth and success.”

Overall, the report says the UK “has the most public companies and the most mature sector.”