Irish biotechs need to fight way out of slump

11 Jul 2003

Fledgling Irish biotechnology companies are facing the most testing market conditions ever seen and will need to explore every avenue if they are to ride out the recession. This was stated by Steve Dunn of Ernst & Young UK’s Health Sciences division at the launch yesterday of ‘Endurance: E&Y’s European Biotechology Report 2003’ in Dublin.

Dunn noted that in order to survive, companies were slashing costs by every means possible – including layoffs and early product termination – but still faced the dilemma of whether to go it alone and risk bankruptcy or else sell an equity stake relatively cheaply to bargain-hunting investors. He added that market sentiment had hardened considerably and investors were not willing to consider a long-term pay back on their investment. “There are no more long-term R&D companies; this model has clearly been removed from the market,” he said.

The report painted a bleak picture of an industry on its knees after two years of plummeting sales and retreating investors. After a decade of 30 to 40pc year-on-year growth in revenues and 10-20pc increase in employee numbers, the European biotech industry hit the buffers in 2002. The market capitalisation of listed European biotech firms dropped 52pc in 2002, from €45bn to €22bn. Only €123m was raised by European biotech firms on the public equity markets in 2003 compared to €5.5bn just two years earlier.

Matt Moran, director of the Irish BioIndustry Association (IBIA), said: “This report highlights the need for strong and concerted support for Ireland’s fledgling biotech sector. Government and its agencies are to be praised for dedicating resources for research in the sector. However, they now need to follow this with a co-ordinated strategy on commercialisation of this research.”

Ken Freeman, senior director of financial operations at Dublin-based ThromoGenics, an early stage pharma that is developing drugs to prevent and treat heart disease, said that Irish biotech firms needed to apply sound business management principles if they were to survive. His blunt message to biotech hopefuls was: “Get serious or die.”

Freeman offered a number of personal suggestions for how Ireland’s indigenous biotech sector might establish itself and grow. Chief among these was the creation of a national biotech incubation centre to foster start-up and early stage biotech firms by allowing them to market-test new technologies. His other proposals included overhauling the current work permit system and reviewing stock option schemes to attract the right skills into the industry; improving the quality of business plans by setting up workshops under the auspices of the IBIA; and that Science Foundation Ireland should set standards regulating the intellectual property that results from projects it funds.

Despite the pressures currently felt by the indigenous sector, Freeman was optimistic about its future. He noted that sizeable US cities like Pittsburgh and Minneapolis had nurtured sizeable biotechnology industries and felt that for Ireland to achieve the same “is quite achievable”. The success of home-grown firms like Galen and Elan showed that it was possible to create a vibrant biotech sector, he felt.

By Brian Skelly