The biotechnology industry is poised for tremendous growth,impelled by a new generation of products reaching the end ofthe R&D pipeline, and simultaneously is undergoing aconsolidation that will result in fewer, larger companies,according to the authors of Ernst & Young's annual report onthe biotechnology industry.

"Biotech '92: Promise to Reality," released Tuesday, depicts anindustry being transformed by a continuous flow of newproducts. Product sales in the past year reached $4 billion, thereport noted, up 38 percent, while drugs in the clinic numbermore than 120, a 33 percent increase.

"Suddenly companies are being judged by sales and marketpenetration. The dreams they used to live on and be valued onhave been put on the shelf" in favor conventional businesscriteria, said G. Steven Burrill, national director of hightechnology industry services.

With more than 20 products awaiting regulatory approval, thesecond generation of biotech products will receive regulatoryapproval over the next six months, according to Burrill. "We aregoing to see an acceleration of product approval," he predicted.

In biotech's "biggest financing year ever," according to thereport, the industry's market capitalization leaped 75 percentto $35 billion. "The buoyancy in the capital markets hassurprised us and the industry as a whole," Burrill toldBioWorld.

Not all of the financial news is positive, however. Venturecapital is drying up and companies are being forced to WallStreet before they are ready for it. Burrill said the climate isputting serious pressure on middle-size companies.

"This year's capital markets dipped deeper and provided a lotof (middle-size companies) with access to public equitycapital, which we didn't expect. The bad side is that you end upwith relatively immature companies that have to perform in avery visible world, and they have portfolios of products thatwon't be ready for five or 10 years," Burrill said in aninterview.

Companies that didn't access public money will find itdifficult to raise private capital, "and there is tremendouscompetition at the strategic alliance level," he said.

A decline in start-ups, coupled with an increasing pace ofmergers and acquisitions, particularly between biotechcompanies, is driving biotech's consolidation, according to thereport, co-authored by Kenneth Lee Jr., national director of thefirm's life sciences industry services.

However, with the increasing professionalization ofmanagement at "established" companies, entrepreneurial talentis leaving to form spinoff companies, many nurtured byalliances with biotech companies that have become largeenough to partner earlier-stage firms.

As a final measure of the emergence of the industry, the reportsuggested that Amgen Inc. could cross the threshold formembership in the Fortune 500 in 1992.

-- Steve Usdin BioWorld Washington Bureau

(c) 1997 American Health Consultants. All rights reserved.