BioWorld International Correspondent
LONDON - The opening year of the millennium was the best to date for European biotechnology, with fund raising, valuations, revenues, company numbers and headcounts all reaching record levels.
In addition, alliances, and mergers and acquisitions were up by 54 percent in 1999, indicating a trend toward greater integration.
There are now around 1,570 European companies, compared to around 1,300 in the U.S., according to the eighth annual Survey of European Biotechnology, published last week by the management consultants Ernst and Young. But despite the record growth and now having more companies, the gap between European and U.S. biotechnology widened.
A flood of EUR30 billion (US$26.62 billion) of new capital in the U.S., compared to EUR6.5 billion in Europe, allowed the U.S. to pull further ahead. As the report notes, at EUR7 billion, Thousand Oaks, Calif.-based Amgen Inc.'s market capitalization is almost the same as the whole of the European sector.
Attaining critical mass should now be one of the primary goals of European biotechnology, according to Glen Crocker of Ernst and Young, lead author of the report. "A single pan-European high technology exchange is needed to encourage through a more liquid capital market that will generate higher exist valuations and tradable volumes," he said. Eight of the top 10 public companies have dual listings, indicating the imperative to look beyond national markets in order to develop a broad investor base.
The UK still leads the field, with 48 of Europe's 105 public companies, three times more than Germany. But Scandinavia (Denmark, Sweden, Finland and Norway) is the new biotechnology hot spot, with 16 public companies, or 22 percent of the total, sporting 56 products, or 28 percent of the entire European pipeline.
Almost 25 percent of revenues (EUR2 billion) are from UK companies and half of biotechnology employment is in the UK. Of 278 products in the pipelines of publicly traded companies, 128 are in UK companies, and the UK accounts for 13 of 27 products in Phase III trials.
However, the UK's dominance is under challenge. None of the top 10 initial public offerings, by amount raised in 2000, was raised by a UK company. And the state-funded expansion of biotechnology means that, for the first time, Germany has the most companies. It boasts 330, compared to 281 in the UK and 175 in France.
Leading German firms such as LION Bioscience AG and Evotec OAI, which were formed only recently, have already moved into the top tier of European biotechnology and have acquired U.S. and UK companies.
Other key findings of the report include:
There were 403 strategic alliances in 2000, up 54 percent over 1999. Big pharmaceutical companies are no longer necessarily the preferred partners, and biotech-to-biotech alliances are booming. In 1998, 86 percent of European biotech alliances was with pharmaceutical companies; this fell to 64 percent in 2000.
European biotech indexes outperformed the London Stock Exchange, Nasdaq and the pharmaceutical sector, as investors differentiated biotechnology from other high technology stocks. While Nasdaq fell by 39 percent, European share indices rose by 50 percent to 75 percent. This is evidence that investor attitudes are maturing, as investors are beginning to view companies in their own right, rather than as an amorphous group called biotech.
This strong market underpinned a funding boom, with EUR6.5 billion raised in 2000, up from EUR1.1 billion in 1999.
Thirty-nine companies had IPOs, doubling the number of listed companies, with the amount raised from EUR0.3 billion to EUR3 billion. The average amount raised per company doubled to EUR80 million. At the end of 2000, the total value of quoted companies was EUR75 billion, compared to EUR36 billion at the end of 1999.
European biotechnology companies are more financially secure than ever before, with 60 percent of the publicly quoted companies having more than four years worth of operating money.
The increase in public valuation fed private equity fundraising, with over 40 companies raising more than EUR10 million, compared to 18 firms in 1999. At EUR1.2 billion, more money was invested by venture capitalists than in the previous five years together.
In terms of financial performance, revenues were up 38 percent to EUR8.7 billion, research and development expenditures up 48 percent to EUR5 billion, and net loss up 42 percent to EUR1.6 billion.