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France Biotech Presents the 8th Edition of Its Annual "Panorama" Survey of the French and Global Life Science Industry in 2008/2009
4/14/2010 2:36:24 PM
Paris, Tuesday, April 13, 2010, the Biotech-Pharma sector is a very innovative sector with a global market that continues to grow despite a major restructuring related to the recent financial crisis. The big pharmas, forced to change their development strategy for new challenges, streamline their costs, are open to emerging markets and look for disruptive technologies.
Small biopharmaceutical and life science companies weakened by the crisis had to face a drastic drop in investment in 2009. They need to find, more than ever, funds to enhance their innovation and diversify their sources of financing, by strengthening their agreements with big pharmaceutical companies.
The Biotechnologies dedicated to health are a national priority, notably with the creation of the Strategic Investment Fund Innobio and the national big loan/grand emprunt whereof 6.5 billion Euros are earmarked to support the industry and SMEs. The objective is to strengthen partnerships between public research and industry by creating structures of excellence within an international dimension.
Key figures 2009 OSEO1 - Innovative Pharma-Biotech sector: the breakthrough innovations involve 83% of the invested amounts for 55% of the projects. - 2/3 of the companies are less than 10 years old and employ fewer than 20 employees. - Four areas stand out in number of supported projects: Ile-de-France (49 projects), Nord-Pas-de-Calais (38 projects), Languedoc-Roussillon (33 projects) and Rhone-Alpes (29 projects) - 383 projects supported in 2009 by OSEO in the Pharma-Biotech sector for 91 million Euros, of which 6 ISI projects - 32 FCIC qualifications
- 10% of OSEO innovation will aid the Biotech-Pharma sector.
"France has a head start in the sector of Pharma-Biotech and is today a key player," said François Drouin, Chairman and CEO of OSEO. "This sector has had a major restructuring the past few years, exacerbated by the crisis. OSEO must accompany this restructuring by helping the biotechs to go on the market by accompanying them as far as possible in their development," he added.
“The data of the Panorama 2008/2009 confirm the decrease of investments in the life science sector, while efforts of public funding in 2009 have increased and helped the industry continue to grow, thanks to the support of OSEO and the Fonds Stratégique d’Investissement (FSI). We are delighted that the life sciences are recognized as a strategic sector in France and we are hoping that the fundraising efforts will increase in 2010, to make French life sciences a leading player in the world," said Andre Choulika, Chairman of France Biotech.
The industry in France
The French life science industry is continuing to mature and has come through the global economic crisis well. It stands out as a core driver of economic and societal development and is a strategic growth axis for French industry.
Continued innovation and therapeutic progress - In the human healthcare market, the survey revealed that the French life science industry is sustainably pursuing its growth; in 2009, 11 products were on the market and 84 were in clinical development (including 10 in Phase III and 4 in the registration phase). The 20% increase in the number of clinical-phase products (up from 55 in 2008 to 66 in 2009, when only considering the 54 companies surveyed both this year and last year) confirms the maturation of France's portfolio of life science companies.
A slowdown in private equity investments - The crisis over the last two years has strongly reduced investment levels in the life science industry. The total amount of new venture capital investment fell from €151 million in 2008 to €65 million in 2009 - a 56% drop. Of the €65 million invested, €22 million went to seed-phase and Series A rounds of financing, with an average ticket of €1.3 million. Even though the total amount of seed funding fell, the number of transactions remained stable (18 in 2008 and 17 in 2009) and emphasized continuing investor interest in life science. In contrast, the value of second and third rounds of financing fell strongly, down from €115 million in 2008 to €43 million in 2009. Even though the number of transactions remained stable in 2009 (16), the average ticket fell by 76%.
In 2009, the stock market window stayed firmly closed. Nevertheless, 2009 was marked by 6 secondary offerings, which enabled 4 companies (Cellectis, ExonHit Therapeutics, NicOx and Innate Pharma) to raise a total of €122 million.
Continued efforts in R&D - In 2008, the total turnover of the 170 life science companies having replied to France Biotech's survey amounted to €194.2 million. The R&D spend was €981 million and the net operating loss was €239 million. By looking only at the set of companies surveyed this year and last year, it is noteworthy that overall turnover only increased by 2% between 2007 and 2008 - versus 67% between 2006 and 2008. R&D expenditure continued to progress, with a 42% increase (36% between 2007 and 2008 and 40% between 2005 and 2006). These figures underline a relative slowing of the increase in turnover (reflecting the impact of the economic crisis), whereas R&D investment efforts continued (notably thanks to public-sector policies and funding in favor of research).
In fact, France's various fostering measures for innovation (notably the "Young Innovative Company" (YIC) start-up fiscal status and the CIR research tax credit) have helped research efforts to grow, despite the slowdown in turnover. In the survey, 164 companies responded to the item on YIC status and 68% actually had YIC status. 62% of these had been able to recruit R&D personnel (between 1 and 10 staff, in the main); 59% had launched new R&D projects and 48% had invested in R&D equipment. In 2008, 102 companies stated that they had received a research tax credit (i.e. 60% of our sample).
Acknowledgment of the life science industry as a strategic axis for innovation - Late 2008 and then 2009 were marked by the French government's stimulus package in response to the global economic crisis, with creation of the €20 billion Fonds Stratégique d’Investissement (FSI) sovereign fund in December 2008). The pharma/biotech sector accounts for 10% of the investment opportunities reviewed by the FSI and is the second-ranked industrial sector in terms of actual investments. France Biotech and the FSI signed a collaboration agreement in June, 2009 (press release dated June 3, 2009).
Another major component of the French government's stimulus package is the National Bond Scheme: €6.5 billion will go to industrial companies and SMEs via an extra €500 million for Oséo and €8 billion for academic research (including €2.5 billion in the life sciences) (Chairman's note on France's National Bond Scheme).
The industry worldwide.
Despite a fragile economic context, the global life science industry continued to grow, with the USA maintaining its market-leading position.
The emergence of biotech, as a counterpoint to the big pharma model.
Despite an anticipated 4% to 6% increase in the size of the global pharmaceutical market in 2010 (IMS Health), there were clear signs of a slowdown in this sector. Biotech firms are emerging fast and are responsible for over 50% of the innovative drugs in development. This change is explained by the biotech industry's growing innovation capacity and April 2008's creation of the Next Biotech index, which enables investors and other financial stakeholders to monitor the sector's performance.
The funding crisis.
The number of venture capital investments in the sector (279 companies and a total of $5.1 billion) fell by 8% in 2009. The decrease relative to 2007 was 24%. The funding crisis was deepened by the crash in the number of IPOs - down from 51 in 2007 (and a total of $2.95 billion) to just 6 in 2008 (and a total of $133 million). Other fundraising activity also fell significantly from $20.8 billion in 2008 to $8.2 billion in 2009 - a 60% decrease. Despite a clear rebound in 2009, investment activity remains well below its 2007 level. This financial crisis will have had a seriously negative impact on the biotech industry (particularly small companies), whereas the big pharma and big biotech companies have been spared, on the whole. These difficulties have triggered a wave of mergers, acquisitions and alliances, with a doubling in the deal count between 2005 and 2009 (source: BioCentury).
The United States remains the global biotech leader, with seven American companies (Pacific Biosciences Inc., Clovis Oncology Inc., Sangart Inc., Zogenix Inc., BioVex Inc., Hyperion Therapeutics Inc., and Sopherion Therapeutics LLC) present in the venture capital top 10 in 2009 (source: BioCentury). One of the milestone events in the US was Roche's acquisition of Genentech for a total of $46.8 billion (Source: BioWorld and Recombinant Capital January 2010). The USA is ahead in all fields: its listed companies (which represent 48% of all listed biotech companies worldwide) had a worldwide market share of 74% in 2008 and accounted for 64% of the biotech industry's workforce. With a 2008 turnover of $66.1 billion and a $25.2 billion USD R&D spend, the sector has a whole turned a net ($417 million) profit for the first time in its history.
The European market. Turnover rose from $13.1 billion in 2007 to $16.5 billion in 2008 - a 26% increase. Likewise, R&D expenditure increased by 11% ($5.1 billion in 2008, versus $4.6 billion in 2007). Europe also felt the consequences of the funding crisis, with only 3 IPOs (Movetis, N.V, D-Pharm Ltd, Human Cell Institute) in 2009 and a total of $158 million in funds raised (Source: BioCentury, February 1, 2010). Small companies have seen cash reserves dwindle. No fewer than 66 companies had less than a year's cash in hand in 2008 (versus 33 in 2007) and only 50 companies had a cash horizon of more than five years (versus 68 in 2007) (source: Ernst & Young, 2008).
The United Kingdom investment market (which had held a dominant role in the European life sciences market) collapsed; after accounting for 37% of the $2.5 billion in European investments in 2007, the figure fell to just 6% in 2009 ($381 million). Switzerland has continued to progress unflaggingly and (with $310 million in total investments in 2009) has overtaken France ($277 million).
The Asia Pacific zone. This zone was long dominated by Australia and Japan but is now seeing the emergence of major new players such as China, India and Singapore. Despite a few hiccups, Australia resisted well in 2008 - thanks notably to good results from CSL, which posted a 4% increase in its stock market capitalization in the midst of a sector in freefall (down 57% for listed companies as a whole). China has woken up to the importance of investing in life science and intends to make good its handicap. The country plans to double R&D investment by 2020 and reach 2.5% of GIP. Despite its current lag relative to the sector giants, the Asia/Pacific zone must now be considered as a key stakeholder in the biotech field, since it has many competitive advantages.
About France Biotech
France Biotech (www.france-biotech.org) is the French association of life science businesses and their partners. Its mission is to help the French life science industry to achieve a leading position in Europe. France Biotech is a driving force for change; it lobbies public authorities, economic organizations, academic research, the media and, particularly, the investor community in order to encourage the emergence of biotechnology as a top-priority, hi-tech industry and to improve the economic, legal, regulatory and managerial environment of these businesses. France Biotech currently has 150 members. The association's corporate members account for the vast majority of the investments, employees and innovative products in France's life science sector.
OSEO (www.oseo.fr) provide assistance and financial support to French SMEs and VSEs in the most decisive phases of their life cycle: start up, innovation, development, business transfer / buy out. By sharing the risk, it facilitates the access of SMEs to financing by banking partners and equity capital investors.