Bad year for Biotechs

10 Dec 2002

Ernst & Young has reported that the combined market capitalisation of Europe’s biotech companies has dropped by more than €30bn, from €80bn at the end of 2000 to just over €50bn at year end 2001.

The findings, which were published in Beyond Borders, Ernst & Young’s Global Biotechnology Report 2002, also showed that initial public offerings (IPOs) in the European biotech sector fell from 39 in 2000 to just six in 2001.

This highlights a major decline in public financing activity for the year.

Among the other findings contained in the report are that more than a quarter of Europe’s publicly quoted companies lost more than two thirds of their value in 2001. Only 12 finished the year with a higher valuation than at the beginning of the year.

Of the six IPOs successfully completed during 2001, four in the UK and two in continental Euorpe, just over €80m was raised compared to the €3bn raised in 2000.

Enda Kelly, partner in Entrepeneurial Growth Markets at Ernst & Young said: “The European biotech sector is now characterised by a high proportion of small, early stage companies resulting in a strain on private equity resources in the short term. If, for example, all the start-up companies founded in the past two years sought just €4m for their next round of funding, investors would be asked to put their hand in their pockets to the tune of €1.6bn.”

“The apparent inability of Europe’s public biotech companies to attract the levels of institutional support enjoyed by their US counterparts is still a great cause for concern for Euorpean biotech companies,” he concluded.

Matt Moran, director of IBEC’s Irish BioIndustry Association said: “Though Ireland has come relatively late to biotech, there can be no doubt that it is essential that we rapidly develop our expertise in this field, given the dependence of our economy on industries such as pharmaceuticals, healthcare and food production — all sectors which will depend increasingly on biotech to remain competitive. Government has recognised this, allocating nearly €500m in research in biotech — what we all have to do now is ensure that this investment in R&D produces new companies with the consequent creation of wealth and employment.”

Ireland ranks 20th out of the 25 primary global biotech markets.

By Suzanne Byrne