THIRD WORLD NETWORK BIOSAFETY INFORMATION SERVICE

9 June 2005

Dear Friends and colleagues,

RE: BIOTECHNOLOGY INDUSTRY CONTINUES TO LOSE MONEY

The biotechnology industry continues to face losses and is not expected to make a profit until the year 2009, according to a recently published Ernst and Young report.

The biotechnology industry lost a combined $6.4 billion last year, bringing the industry's total accrued loss since its birth in Silicon Valley in the mid-1970s to more than $45 billion. The report is, however, optimistic that biotechnology will become profitable by 2009, pointing to some 365 drugs in the final stages of development compared with 290 in 2003.

The industry’s continuing losses should be sobering news for the many countries which are embarking on or plan to launch their biotechnology industries. An economist likens the industry to a gambling den where the odds of losing are high.

``It's essentially like a casino,'' said Joseph Cortright, an American economist. ``There are lots of bets you can lay down, and the potential can be very valuable, but for the most part, the odds that any one will pan out are extremely long.''
 

With best wishes,

Chee Yoke Heong
Third World Network
121-S Jalan Utama
10450 Penang
Malaysia
Email: twnet@po.jaring.my
Website: www.twnside.org.sg

REF: Doc.TWN/Biosafety/2005/J

Biotechnology Loses Billions A Year

By PAUL ELIAS The Associated Press
Published: Jun 1, 2005


SAN FRANCISCO - Since researchers first mixed genes from two species more than a quarter century ago, biotechnology companies have promised to revolutionize the pharmaceutical industry - and disrupt centuries of farming practices.
 
Despite that promise - and some significant breakthroughs in treating cancer, diabetes and other widespread and deadly diseases - the industry's losses continued to mount in 2004.
 
The biotechnology industry lost a combined $6.4 billion last year, according to a new report from Ernst & Young. The industry's total accrued loss since its birth in Silicon Valley in the mid-1970s is more than $45 billion.
 
The 93-page report mostly was upbeat: federal regulators approved 20 new biotech drugs last year, and 230 such medicines and other related products are on the market. Ernst & Young is optimistic that biotechnology will become profitable by 2009, pointing to some 365 drugs in the final stages of development compared with 290 in 2003.
 
Revenue worldwide grew 17 percent to $54.6 billion based on Ernst & Young's study of 641 public companies and 3,775 private companies.
 
A handful of biotechnology companies indeed have hit it big after modest beginnings, making their initial investors wealthy.
 
The market capitalization of Genentech Inc., the San Francisco biotechnology pioneer, recently surpassed several pharmaceutical giants such as Merck & Co. and biotech rival Amgen Inc.
 
For its part, the drugs that launched Thousand Oaks- based Amgen into profitability - epogen and its successors - rang up more than $10 billion in sales last year for Amgen and three competitors who market the drugs, which is used to treat anemia in many cancer patients and people with kidney disease.
 
Genentech earned $785 million in 2004, and Amgen reported profit of $2.4 billion for last year.
 
Hunting For The Next Success
 
Investors, meanwhile, continue to plow billions into biotechnology each year in hopes of getting in on the next Genentech, which shareholders value at $83 billion.
 
According to Ernst & Young, the industry raised $17 billion from investors last year, the highest total since 2000. Venture capitalists invested $3.6 billion last year.
 
Yet there's no getting around the industry's continued losses. For every success such as Genentech and Amgen, there are dozens of failures.
 
``It's a crazy industry to invest in,'' said John McCamant, a biotechnology investor and editor of a stock-advising newsletter. McCamant nevertheless is optimistic that biotechnology is poised for explosive growth in the coming years and that measuring it today against staid sectors such as the automotive industry is unfair.
 
Others are more skeptical.
 
``It's essentially like a casino,'' said Joseph Cortright, a Portland, Ore. economist. ``There are lots of bets you can lay down, and the potential can be very valuable, but for the most part, the odds that any one will pan out are extremely long.''
 
Effect Of Science Isn't Huge
 
Biotechnology remains a money-losing niche industry of 1,400 companies employing about 183,000 workers nationwide. By contrast, Wal-Mart employs 1.7 million workers, and its annual revenue rivals the entire biotech industry's annual sales.
 
Cortright, who co-wrote a report critical of biotechnology's ability to drive a region's economic growth, says local government officials who promise companies all sorts of incentives to relocate are ignoring the industry's financials.
 
``The mistake that people make is confusing science that is really cool with something that is going to have a significant economic impact,'' he said.