Development of New Biotech Products Accelerates at Rapid Pace; Product Approvals at an All-Time High With Pipeline Promising More.

PALO ALTO, Calif.--(BW HealthWire)--March 2, 1999--A report issued today by the professional services firm Ernst & Young LLP showed a record growth in the number of FDA product approvals in a twelve month period.

According to the Ernst & Young 13th Biotechnology Industry Annual Report "Bridging The Gap '99," the FDA approved 24 new biotech products in 1998 and growth is likely to continue with over 300 products in pivotal stage trials, double the amount in 1997.

New Products Fuel Industry Growth

According to the report, product sales exceeded $13 billion, a 17% increase over the prior year with total industry revenue of $18.6 billion. The 24 industry drug approvals represents a twelve-fold increase since 1994, with antibodies leading the recent string of successes.

Biotech companies now have over 1,200 product candidates in clinical trials, up from approximately 700 last year. In November 1998, the FDA pace accelerated with the approval of three products in a single day.

"With over 80 biotechnology drugs on the market, the industry is addressing the plethora of medical needs, significantly improving the quality of life for many people," said Scott Morrison, the report co-author and an Ernst & Young Life Sciences Partner.

"The accelerating pace of discovery and a rapidly aging population with associated healthcare demands, ensures that biotechnology will be a leading industry in the next century."

Technology Advances Soar

Aggregate research and development expenditures approached $10 billion, an increase of over 16% from the prior year. New technologies hit the newsstands with a bang in 1998 as the rapid acceleration of the Human Genome Project grabbed the headlines. The project report predicts that sequencing the complete human genome may be one of the most significant milestones for the biotechnology industry.

Research has shown that genetic data may be of limited use without the knowledge of a gene's protein products and so technologies are beginning to bridge the gap between gene and protein.

Pharmacogenomics continued to gain acceptance as a model for drug development in the future with the potential to significantly shorten development times by capitalizing on advances in genomics and bioinformatics technologies.

"The allure of the pharmacogenomics model is clear. As a greater knowledge of the compound's efficacy in subsets of patients increases, so does a company's ability to achieve greater success in the clinic," says report co-author and Ernst & Young Life Sciences Partner Glen Giovannetti. "An enhanced ability to predict clinical outcomes could shorten development cycles and improve product economics."

Financing Down and Alliances Up

The equity markets cooled off by posting their worst performance in years in 1998. The $2.8 billion raised in the latter half of 1997 and the $2.6 billion in the first half of 1998, helped to mask the growing weakness in the public equity markets. Few significant public financings were completed in the latter half of 1998.

A significant gap emerged as investors appeared unwilling to recognize and reward the value being created in smaller capitalization companies during the development process of a product.

"Over 200 of the 327 public companies tracked by Ernst & Young had market valuations of less than $100 million. It has become apparent that there is a fundamental shift in investor interest," noted Kenneth B. Lee, Jr., a Senior Advisory Partner in the Life Sciences Practice of Ernst & Young and a Partner in the firm's Center for Strategic Transactions.

"Structural changes on Wall Street and a need for greater liquidity among investors in a volatile market have recently driven many institutional investors from all but the largest biotech companies. This phenomenon seems likely to be the driving force for financing and transaction strategies of a significant portion of the industry."

Public Policy Making Headlines

The passage into law of the Food and Drug Administration Modernization Act (FDAMA), in addition to the reauthorization of the Prescription Drug User Fee Act (PDUFA), put the finishing touches on what was arguably the year's single most productive area for the biotechnology industry.

These implementations are positively impacting the industry with continued reductions in drug approval times and developments on fast-track drug approval status.

Cloning continues to be a contention among members of the industry and is likely to remain the subject of legislative debate for some time. The developing technologies in 1998 raised awareness of such issues as the fact that genetic data may become a commodity for families with therapeutically important genotype.

The Biotechnology Industry Organization (BIO) is a significant player in the attempt to bridge the gap between public anxiety and reassurance, and has formed a powerful link between the industry and Capitol Hill.

Change In European Biotech Landscape

Europe's biotech landscape witnessed dramatic change with such Continental European companies as Innogenetics, Qiagen, Genset and NeuroSearch emerging to demand equal recognition as large market capital companies.

By contrast, the BioCentury London Index of leading U.K. bioscience companies declined dramatically (almost 50 percent by June 1998). Several companies lost chief executives and many U.K. biotech companies were trading close to their cash levels as investors assigned no value to the technology.

This lack of enthusiasm staunched London's IPO market, as only three companies completed offerings. On the other hand, the small supply of biotech stocks compared to investor demand meant that continental firms listed on domestic exchanges did not have to struggle to find buyers.

To view or download "Bridging The Gap '99," visit www.ey.com/publicate/life.

Ernst & Young LLP (www.ey.com) provides assurance and advisory business services, tax services and consulting for domestic and global clients. The firm has 30,000 in 87 U.S. cities. Ernst & Young LLP is a member firm of Ernst & Young International (www.eyi.com), a global organization whose member firms, located in more than 130 countries, have 85,000 people working in 675 cities.