Patent Baristas

About Biotech talks about Biotech Business Models this week, such as the Platform, Product and Vertical models for early-stage biotech companies. In all cases, patents and IP rights are noted to be at the core of any venture. Noteably is that the Platform business model has persevered, combined with contract research and services for the generation of revenue.

However, the Fully Integrated Pharmaceutical Company (FIPCO) model is making a comeback. The Ernst & Young Beyond Borders: Global Biotechnology Report 2007 has been released and provides a good outlook of unprecedented financing totals and deal activity that indicates a continuation of the strong growth trend that appeared in the 2006 report.

According to a press release by E&Y, the global increase in capital raised was reported to be 42% and double-digit increases in revenues were reported in Canada, the USA and Europe. In addition, the outlook for the biotechnology industry in 2007 is exceptionally good saying that the biotechnology sector “is comfortably on track to become a $100 billion revenue industry before the end of the decade.”

The revenues of publicly traded U.S. bio-tech companies grew by over 14 percent in 2006. Public companies’ research and development (R&D) grew by 38 percent, and net loss increased by 151 percent, from $1.4 billion in 2005 to $3.5 billion in 2006. However, these swings resulted largely from some very significant acquired in-process R&D (IPR&D) charges related to large acquisitions. Factoring out the impact of these deal-related charges, which totaled in excess of $4 billion for the industry, R&D expense would have grown by about 14 percent, essentially keeping pace with top-line revenue growth. If the biotech industry had kept R&D flat during 2006, it would have made money.

The number of alliances more than doubled compared to 2005, and their total value reached an all-time high of $23 billion — a 69 percent increase. M&As also soared, reaching the second highest total recorded in the industry’s history.

This was also a banner year for biotech financing. U.S. biotech companies raised a total of $20.3 billion, making this the best year on record, excluding the bubble year of 2000. Venture capital financing set a record at $1.9 billion. Worldwide, venture capital reached $5.4 billion. The initial public offering (IPO) markets remained challenging for many companies. For the third year in a row, the vast majority of IPOs failed to go public within their desired price ranges.

The U.S. had another strong year for product approvals, with 36 product approvals, including 25 New drug applications (NDA) and biologic license application (BLA) approvals. This compares favorably with 2005, when the industry secured 33 approvals, including 21 NDAs and BLAs.

The biotech industry employs directly about 191,000 people (public companies only), 69% in the U.S., 21% in Europe, 4% in Canada and remaining 6% are in Asia-Pacific.