Beyond Borders: Global biotechnology report 2010

Australian biotechnology at a glance, 2008–09 (US$m)
Public company data 2009 2008 % change
Revenues 3,721 3,475 7%
R&D expense 417 436 -4%
Net income (loss) 545 319 71%
Number of employees 11,060 10,110 9%
Market capitalization 18,597 21,557 -14%
Total assets 7,082 6,339 12%
Number of public companies 74 83 -11%
Source: Ernst & Young and company financial data
the bulk of this improvement, the rest of
the industry held steady. Without CSL,
the industry’s net loss in US dollars was
essentially flat during the year.
The net income story was driven at least
in part by companies’ cost-cutting efforts
in the current economic environment.
As in the US, Europe and Canada, this
was reflected in R&D expenditures. The
industry’s R&D spending declined by 4%,
from US$436 million in 2008 to US$417
million in 2009. Without CSL (which
increased R&D spending by 38% during this
period), the industry’s R&D expenditures
would have declined by a far steeper 22%.
A transformational year
In more ways than one, 2009 has indeed
been a transformational year for the
biotechnology industry. After years of
double-digit increases on the top line,
the industry’s revenue growth slowed
considerably. With a forecasted slow recovery
for the global economy and mounting pricing
pressure on drugs, the downward pressure
on revenues — in the absence of new
breakthrough therapeutics — could well be
part of the new normal for years to come.
R&D spending will remain an important
driver. Biotech remains an innovationdriven
business, and R&D is inherently
unpredictable. While companies and
investors will, and should, continue to
look for more efficient ways to develop
products in the new normal (see the Global
introduction article for more details), drastic
reductions in R&D spending could result in
lower levels of innovation and new product
introductions in years ahead — with negative
repercussions not just for the industry’s
performance, but also for its ability to
attract investors.
The encouraging news, though — and
perhaps the biggest transformation of
all — is in the industry’s bottom line. Net
income was boosted considerably by costcutting
efforts, which are likely to continue
given the more challenging fund-raising
environment. Much of the cost cutting
in 2009 was precipitated by short-term
thinking and the very real need to survive.
In many cases, companies may well have
overreacted — trimming not just fat, but
R&D muscle and bone as well. However,
as biotech finds a new equilibrium, we
are likely to see a middle ground emerge,
where the industry continues to develop
groundbreaking innovations but finds
more efficient approaches and business
62 Beyond borders Global biotechnology report 2010
models for commercializing products and
technologies. That would be good news
indeed — not just for biotech companies
but for the investors who back them and
the patients who need their innovative
new products.