Biotech's Hype And Hope Yielded Losses
Since researchers first mixed together genes from two species more than a quarter century ago, biotechnology companies have promised to revolutionize the pharmaceutical industry -- and even disrupt centuries of farming practices. Despite that promise -- and some very significant breakthroughs in treating cancer, diabetes and other widespread and deadly diseases -- the industry's combined 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 was mostly upbeat: federal regulators approved 20 new drugs created with biotechnology last year and 230 such medicines and other related products are now on the market. Ernst & Young is optimistic that biotechnology as a whole will become profitable by 2009, pointing to some 365 drugs in the last stages of development compared to 290 in 2003. Revenues worldwide grew 17 percent to $54.6 billion based on Ernst & Young's study of 641 public companies and 3,775 private companies. "What's remarkable about this industry is that you can lose money for many years," said Ernst & Young's Michael Hildreth. "But the whole nature of your business changes dramatically once a product is improved." A handful of biotechnology companies have indeed hit it big after modest beginnings, making their initial investors wealthy. The market capitalization of Genentech Inc., the South San Francisco biotechnology pioneer, recently surpassed several pharmaceutical giants like Merck & Co. and biotech rival Amgen Inc.