Shrinking U.S. Biotechnology Sector Lost 25% of Companies in Past 3 Years

One hundred publicly traded biotechnology companies in the U.S. have been acquired or ceased operations since the end of 2007, a 25 percent drop in the number of active companies, a report said.

Companies have struggled to raise funds from public offerings and acquisitions haven’t filled the void, said John Craighead, managing director for investor relations and business development of the Biotechnology Industry Organization, a Washington-based trade group. While acquisitions of biotech companies grew to 55 in 2008 from 40 in 2007, the number fell to 38 last year and to 21 so far this year, Craighead said.

The estimated 294 public companies that remain in the biotechnology industry are in a better cash position than they were at the end of 2008, when 45 percent of companies had less than a year’s worth of funds available. Today, only 25 percent of companies have such limited resources, according to data released today by BIO.

“The biotech industry is significantly smaller than it was three years ago,” Craighead said during a presentation at the group’s annual investor meeting in San Francisco.

Since August 2009, 13 biotechnology companies have gone public and the share prices of 12 of the companies fell by an average of 20 percent once they began trading, Craighead said. The offerings were priced 30 percent below the company’s initial goals, he said.

Among surviving publicly traded companies with at least one year of cash, 40 percent have cut staff, 11 percent have issued debt and 7 percent have sold assets, Craighead said.

Rob Waters
October 5, 2010
Bloomberg