The global biotechnology market is experiencing a period of sustained growth as the benefits of research are realized. Many venture capitalists and large pharmaceutical companies are investing in biotechnology in the hope that a new drug, a so-called ‘biotech blockbuster’ will be discovered. Companies and governments alike are also beginning to understand the positive impact on agriculture. Designed agronomic traits can give plants qualities that increase production or reduce the need for other inputs such as chemical pesticides or fertilisers. All of this is creates demand and leads to strong growth on a global scale.
The global biotechnology market grew by 7.7% in 2011 to reach a value of $281.7 billion, representing a compound annual growth rate (CAGR) of 9.9% for the period spanning 2007-2011.
The United States continues to dominate the global market, accounting for 32% of all global revenue. In spite of the fact that it is the world’s most mature biotechnology market, the US continues to grow at a strong rate, demonstrating that biotechnology as a whole is in a good position.
The market is also burgeoning in many other nations. Western European countries such as France, Germany and the UK are all experiencing strong growth, as are the developing economies of Asia.
The medical/healthcare segment continues to be the market’s most significant. The situation does however differ from country to country with some highly concentrated.
One of the greatest challenges facing companies operating in this industry is a shortage of funding as a result of a less than promising global economic situation. Funding from venture capitalists has started to dry up. This is an issue as the biotechnology market is heavily dependent on cash to support research and the commercialization of products. For example, in France funding was down 40% in 2011, slightly more than the Europe-wide average of 36%, thus illustrating just how difficult it is becoming to secure financial backing. Furthermore, a survey conducted by BioteCanada showed that for 60% of respondents, raising capital was the most challenging issue facing them.
This has increased the pressure on governments to step in and fill the void in the form of subsidies. There are however, signs that such action is not forthcoming. In fact, the French government has acted conversely and, eager to reduce France’s deficit, has reformed some of the Young Innovative Company provisions from which many of the start-ups and SMEs conducting research have benefitted. For example, tax losses are now only available for carry-back to the fiscal year immediately preceding that in which the losses arise and up to a maximum of €1 million ($1.4 million).
Some of the world’s largest pharmaceutical companies have seen this as an opportunity to grow their biotechnology portfolios by acquiring smaller, specialized players in need of funding. This allows the buying company to immediately acquire hard won intellectual property assets. While this reduces the time to market and the risk of failure, only the more financially-strong companies will be in a position to make such acquisitions and so in some of the more established biotechnology economies, the market is becoming more concentrated.
One such example was La Roche’s acquisition of long-established US player Genentech in 2009. Roche became a leading company in the biotechnology market as a result of this acquisition. Genentech has been operating in the industry for 35 years, using human genetic information to discover, develop, manufacture and commercialize medicines to treat patients with serious or life-threatening medical conditions. La Roche acquired all of this expertise for $46.8 billion.
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