Beyond Borders: Global biotechnology report 2010

Growth rate
Canada
Behind the numbers: the impact of the Genentech acquisition on US biotech financial results
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
-30%
8%
-13%
2008 2009 2009 adjusted
for Genentech
acquisition
In Canada, the number of public companies
declined significantly, from 72 companies
in 2008 to 64 companies in 2009 — an 11%
reduction. A number of firms were acquired
or went out of business in the current
downturn, and there was a complete lack of
IPOs to replenish the stock. On the private
company side, the number of firms declined
9%, from 286 in 2008 to 260 in 2009.
The revenues of publicly traded biotech
companies in Canada grew by 9% over the
prior year. While this may appear to be better
than the 9% decline seen a year earlier, the
revenue drop in 2008 was actually driven
by the acquisition of four large Canadian
companies by foreign firms. Normalizing for
those acquisitions, the growth rate in Canada
for 2008 was actually 26% — significantly
higher than the acquisition-adjusted growth
rate in 2009, which is 11%.
As in the US and Europe, public companies
in Canada have had to engage in significant
cost cutting to survive. These efforts have
delivered results on the bottom line, where
the publicly traded industry’s net loss fell an
astounding 94%, from US$1.2 billion in 2008
to only US$70 million in 2009 — the industry’s
lowest overall net loss in the last decade.
This improvement on the bottom line had
three distinct drivers. First, companies have
cut back their expenditures in the current
financial climate. Second, a number of
loss-making companies have been acquired
or ceased operations. Third, significant writeoffs
of intangible assets over the last few
years have abated as very few companies
now carry any sizable intangible assets on
their balance sheets.
60 Beyond borders Global biotechnology report 2010
10%
2008 2009 2009 adjusted
for Genentech
acquisition
Revenues R&D
Source: Ernst & Young
Chart shows year-on-year change in aggregate financial results of US publicly traded biotech companies.
21%
-24%
-13%
Unfortunately, much of the cost cutting has
come at the expense of R&D spending, which
fell 44% in 2009. R&D is the driver of future
growth in this sector, and this sharp decline
could have long-term repercussions for the
Canadian industry.
Despite the cost-cutting measures, there was
no appreciable improvement in the industry’s
survival index. While the amount of capital
raised by Canadian firms rose significantly
during the year, the vast majority of these
funds went to a small group of companies,
leaving 57% of companies with less than one
year of cash on hand.
Boosted by an overall stock market recovery,
the industry’s market cap surged 56% during
the year. Even with this recovery, however,
the industry only partially made up for the
ground it lost in 2008, when the industry
lost 61% of its market value.