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Volume 8 Number 4, July/August 1998, pp. 215-221
Conference PaperBiotech '98 An Update by G. Steven Burrill
Code Number:AU98029
Cheers and Fears Continue for Bioscience Companies, Investors Highlights Summary
Industry Growth Revenues are up to nearly $16 billion, including a 25 percent rise among public companies. The industry's market capitalization has increased from about $80 billion last year to $110 billion. European Competitors The big action in Europe, mostly in the Benelux countries (Belgium, The Netherlands, Luxembourg), Germany and France, where there are now some 700 companies operating, compared to about 580 in 1996, all driven by access to capital. Public equity markets there are beginning to open up, fueling investment by earlier stage investors at unprecedented levels. We're seeing a phenomenal growth in startups in Europe, more than any other place in the world. Enabling Toolbox We're now dealing with a set of technologies that are changing the gene identification world, with more rapid gene sequencing on one hand and positional cloning and mapping on the other. We've done massive amounts to not only find genes, but to understand how they work, where they're expressed, how you turn them off. In parallel with this, we've added tremendous computer power to the chemical side and have built a new business called combinatorial chemistry. There are a whole lot of different technologies used to accomplish different activities A hundred or more companies might fall into this enabling toolbox category today, and more private companies are ready for IPOs. FDA Reform Our friends in Washington finally moved ahead with reform legislation. Now we're in a phase of risk transference in which regulatory agencies in the US and abroad are much less adjudicators of risk and much more into transferring bioscience to the medical, patient and buyer communities. This is good news for us, but of some concern for investors because products may get to the market sooner while still retaining some meaningful risk. Cloning We've had the good news/bad news of Dolly, the genetically cloned sheep. It's good news for mankind and the practice of medicine. But bad news because it causes a great deal of concern about the misuse of this technology, despite effective advocates for the industry trying to see that we adopt sensible guidelines. Investors are spooked when this happensAs a public policy issue, genetics catches the public's fancy probably more as a negative than it is to us, because people are concerned about the abuse of genetic information. Marketplace Populations in Europe and the US are getting older, and we worry about repairing ourselves and recreating tissues and bones. Big products for us today are largely not the infectious disease products, except in the HIV area, but products that begin to deal with an ageing population. We have a dramatically increased marketplace with an ageing population, only for very different products than before. From a business model standpoint, this is different from building a company to operate in Asia, which has a younger population. You've got to understand the macro dynamics of this, that disease models in Asia are quite different than in the US. Managed Care We've wrung all the easy fixes out of health care. Along with these efficiencies we've introduced interesting new technologies to treat things we weren't about to treat before. The more we extend the lives of people with better products, the more it costs our society because a large portion of the nation's health care expenses are for the elderly. Product Development We have some 100 therapeutics in the market and an enormous pipeline awaiting approval. Most of us believe the next three to five years will see a boom in products reaching the marketplace, and the billion dollar product will be more commonplace. Better genomic information means better clinical trials; you're going to see an industry that finds ways to shrink time to market. Deal-Making Big pharmaceutical companies, even at their best, can't meet their needs for product and revenue growth without reaching outside, and we remain an important source for them. We do a better job as an industry by partnering than we do by acquiring our way forward. Our friends in Europe are active in partnering and acquisitions. Financings The financing world is far more complex than it used to be. We have many more ways to finance companies other than just venture capitalist and public equity markets. For the year than ended in June 1997, we raised just half the capital we did in the booming year of 1996. Market caps continue to be dominated by a handful of companies; half of the industry's $100 billion market cap is in 15 companies. By sector, market cap is dominated by the integrated companies, and those in cancer drug delivery, AIDS, and others in those more traditional areas. Business Models Today, we live in a world of "whatever works". We have vertical integration, virtual integration, and horizontal integration. Big pharmaceutical companies have tried to occupy each of these spaces Our industry, however, is slicing up the market in every way imaginable; in some cases, different slices have led to whole new business segments, like combinatorial chemistry Where's the value in all this? We don't know where Wall Street will love us in the future. I suspect it's some degree of horizontal and vertical integration. But the choice of which isn't as important as ececution. Companies with great management and sustainable business with good cash flow will do well with growth in capital. In summary, the tool box is hot, capital markets are tricky (and looking good in Europe), clinical trials are still a risky game, pharmaceutical alignments are very much a part of us, bioethics is a booming issue, and marketplace change is being driven by ageing in the US and Europe and youth in Asia. Editor's Note We also present to readers copies of some key slides from Mr Burrill's plenary lecture. These are selected from 50 slides shown.
Figure 1 : Practice of Medicine Figure 2 : Evolving Industry Structure About G. Steven Burrill Mr Burrill is Chief Executive Officer of Burrill & Company, a private merchant bank serving life science companies. Mr Burrill has devoted his career to helping life science companies launch their operations and sustain their growth in the face of a constant and rapidly changing environment. He currently serves on the Board of Directors for Advanced Bioresearch Associates, Axis Genetics, DepoMed, Genitope Corporation, Hambro Health International, Maxim Pharmaceuticals, Promega Corporation, Scitech Genetics Limited, TRANSGENE, UltraOrtho, Inc., and is Chairman of the Board of NuGene Technologies, Inc. He is an advisor to the Boards of Cortecs International Ltd., Ophidian Pharmaceuticals, Inc., and also an advisor to the Royal Bank of Canada, Ernst & Young International, and Transamerica Business Credit. During his 28 years with Ernst & Young, including the last 17 as a partner of the firm, Steve was responsible for directing and coordinating the firm's services to clients in the biotechnology/life sciences and high technology industries, and was the International Chairman of the Manufacturing/High Technology practice. He continues to work with industry leaders throughout the world to help companies meet financial, managerial, and strategic challenges. As an internationally recognised spokesman for the life sciences and high technology industries, Mr Burrill has authored a variety of articles and books about the business, management and financial concerns of life science, high tech and high growth companies. He is a regular columnist for BioPharm, European Biotechnology Newsletter and has co-authored Enrst & Young's annual reports on the US and European biotechnology industry. He chaired the National Research Council study on linkages in biotechnology between Japan and the United States and was also involved with the US-Japan Science and Technology Agreement Study of Technology Transfer Mechanisms in the US, Japan and between the two countries. He is a founder of the Foundation for the National Medals of Science and Technology and currently serves on its Board of Directors. He also serves on the Board of Directors for the Bay Area Bioscience Center, The Exploratorium, and the National Research Council Committee on Japan. Copyright 1998 Australian Biotechnology Association Ltd. The following images related to this document are available:Line drawing images[au98029b.gif] [au98029a.gif] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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