Biotechnology companies are finally starting to recover from the bubble that burst back in 2000. By the end of 2003, the industry secured $16.4 billion in new financing during the year, up 56 percent from 2002, and eight new biotech companies had begun trading on NASDAQ. Overall, the NASDAQ Biotech Index rose 46 percent in 2003. New leadership at the U.S. Food and Drug Administration, the Medicare Prescription Drug and Modernization Act of 2003, and robust economic growth enabled biotech’s stellar recovery.
“There definitely has been a change in attitude toward biotech in the investment world”, says Karen Mroz-Bremner, PhD, investment research associate at Shaker Investments. She attributes gains in the biotech sector to capital markets that had been essentially closed since 2000, “although not like in 2000 when everyone had to be in biotech.
“Biotechs need cash — especially the younger companies,” says Mroz-Bremner. “The market in 2003 was finally willing to open up and let those companies become stronger.” She expects that this year will be good for health care and biotech, citing such positives as a more favorable economy, steady interest rates, a strong gross domestic product, and low unemployment.
Part of biotech’s recovery also is due, in part, to a new attitude at the FDA, driven by Commissioner Mark McClellan, MD, PhD. McClellan wasted little time in achieving some of his earliest objectives: streamlining the approval process by drafting new guidance documents for certain diseases and emerging technologies, as well as reducing regulatory review time by 10 percent. Delivering the keynote address at the Biotechnology Industry Organization convention in Washington last June, he stated, “We intend to shift downward the time that it generally takes to get a safe and effective drug approved by the FDA.” Faster approvals translated into capital markets opening up.
With capital markets embracing the industry, eight new biotech IPOs hit the market at the end of 2003, after five consecutive quarters without a new issue. Some analysts predict that as many as 25 new biotech IPOs will hit the market this year — 15 to 20 of them in the first two months of the year. The number of IPOs, however, will not come close to 2000, when 67 biotech companies went public.
The Battle is On: States Fight for Biotech Growth
With the growth spurt in the biotech industry, many states and local economic development agencies — which view biotech as a clean industry and a promising addition to their economies — are aggressively going after their business. The privately funded North Carolina Biosciences Organization took out a full-page advertisement in the Boston Globe, in an effort to entice Boston-area CEOs to move their biotech companies to the warmer climate of North Carolina. In addition, as part of the relocation campaign, Boston-area biotech CEOs received letters from North Carolina officials offering a better business environment.
The Globe ad focused on the debate about whether to allow Canadian drug imports into the United States. “Instead of seeking illegal and potentially unsafe drugs from Canada, local governments across our state are searching for better ways of encouraging the growth of the biotechnology industry and other companies in our sector,” the ad read. North Carolina is also working toward authorizing the issuance of bonds to finance the purchase of equipment and construction of facilities for life science companies.
Meanwhile, BioFlorida, Florida’s nonprofit bioscience trade organization, has embarked on a similar ad campaign to entice Illinois biotech and drug makers to relocate to the Sunshine State. Again, drug importation is at the heart of the campaign, positioning Florida as an alternative for companies operating in states seeking to allow Canadian drug imports or Canada-style price controls. Illinois Gov. Rod Blagojevich has been trying to get the federal government to allow his state to import of less expensive brand-name drugs from Canada.
Other states are trying to strengthen or develop their biotech infrastructures. New Jersey is offering incentives, including a $10 million biotech venture fund, a business employment incentive program and a tax credit transfer program. New York Gov. George Pataki, in his State of the State address Jan. 7, added his commitment to the Biotech industry, saying, “We can out-compete anyone in the world” and pledging tax benefits for biotech to help them gain access to capital. In Seattle, a number of institutions and groups are working to promote the region’s biotech growth. Even smaller cities, such as Austin, Texas, are pushing for biotech investment; in Austin, 7,000 people are employed in biotech-related industries — despite the fact that Austin has no medical school with which to build research partnerships.
New Jersey To Allow Stem Cell Research
New Jersey, one of the top five biotech regions in the country, will allow use of stem cells from human embryos in research, now that Gov. James McGreevey has signed a bill to allow stem cell research. After California became the first state to pass such legislation, many prominent researchers relocated to the Golden State, and Stanford University received an infusion of private funds for the development of a stem cell research center. The Roman Catholic Church and antiabortion groups expressed bitter disappointment over the New Jersey legislation, with opponents contending that stem cell research permits the development of human clones. Several states and Congress have legislation pending that would outlaw embryonic stem cell research.
CHIT-CHAT: Alliances between mainstream pharmaceutical manufacturers and biotech companies have doubled in the last five years, according to a new report from Cutting Edge Information. According to the report, big pharma, which had grown accustomed to relying on blockbuster drugs, has turned to biotech to replenish depleted pipelines…. Array Bio-Pharma and Genentech have formed a licensing agreement to develop cancer drugs. Following the announcement, Array’s stock rose 33 per-cent…. Invitrogen has purchased BioReliance for $500 million.… Amgen was busy investing in two companies — $20 million in ViaCell and $25 million in Infinity Pharmaceuticals. The day after Via-Cell’s cash infusion was announced, the company said it would drop its plans to go public.
CHIT-CHAT: Alliances between mainstream pharmaceutical manufacturers and biotech companies have doubled in the last five years, according to a new report from Cutting Edge Information. According to the report, big pharma, which had grown accustomed to relying on blockbuster drugs, has turned to biotech to replenish depleted pipelines…. Array Bio-Pharma and Genentech have formed a licensing agreement to develop cancer drugs. Following the announcement, Array’s stock rose 33 percent…. Invitrogen has purchased BioReliance for $500 million.… Amgen was busy investing in two companies — $20 million in ViaCell and $25 million in Infinity Pharmaceuticals. The day after ViaCell’s cash infusion was announced, the company said it would drop its plans to go public.