U.S. Biotech Industry Poised for Growth

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BY GRANT GROSS,IDG News Service

The United States biotechnology industry is relatively healthy and poised for growth, according to the first U.S. government survey and report on the industry, released last month by the U.S. Department of Commerce.

The survey, which included 1,031 U.S. firms engaged in biotechnology activities, found that the participating companies held just under 24,000 patents in the last quarter of 2002, and had more than 33,000 patents pending. Those patent numbers show an industry poised for growth, with the potential for many new products, said Phillip Bond, under secretary of Commerce for Technology at the Commerce Department.

The U.S. government did not have a comprehensive picture of the U.S. biotech industry before the report was released, Bond said. “This is not the final word on biotech in the United States, but it is the first serious word, the first serious collection,” he said at a Washington, D.C. press conference on November 13, adding that the report should help guide U.S. government biotech policy.

Just under 59 per cent of survey respondents identified the regulatory approval process and costs as a barrier to advancement. Another 53 per cent identified research costs as a barrier, and 53 per cent identified access to startup capital as a barrier. Another 35 per cent identified patent rights held by third parties as a barrier, and 35 per cent identified patent fees and the approval process.

Asked what message policy-makers should take from the survey, Karen Laney-Cummings, acting director of the Commerce Department’s Office of Technology Competitiveness and the survey project leader, said it was “quite telling” that regulation, patent issues and access to capital were identified as some of the top barriers to advancement. But she added that followup surveys may be needed to provide enough details to make policy recommendations.

While 56 per cent of those responding reported either no operating income or an operating loss in 2001, the average annual growth in net sales for the respondents’ biotech operations exceeded growth of their overall business operations — 10.3 per cent growth in biotech versus 5.9 per cent growth for other operations between 2000 and 2002. Many of the responding firms had business units other than biotech.

The survey, promoted by the U.S. Commerce Department as the first comprehensive survey of the U.S. biotech industry, found 1.1 million total employees in the responding companies, with 130,000 employees engaged in biotech activities. Surveyed firms reported $50.4 billion US in net sales related to biotech in 2001, with an operating income of $9.4 billion US. The biotech activities of the responding firms reported a 1.1 per cent growth in operating income in 2001, compared to a 3.9 per cent drop in operating income for respondents’ overall businesses.

The survey also found that biotech-related research and development spending in 2001 amounted to $16.4 billion US — about 10 per cent of all U.S. industry R&D that year. Biotech R&D was a heavy expense for firms responding, accounting for more than 33 per cent of the respondents’ biotech budgets, compared to less than 10 per cent of the respondents’ total business expenses.

Representatives of the Biotechnology Industry Organization (BIO), which assisted the Commerce Department with the study, said the study will help the biotechnology industry and policy-makers understand the biotech industry, including its economic impact and the resources it has available. “The findings here give the federal government information that will influence policy . . . for at least a couple of years,” said Debbie Strickland, director of publications at BIO. “It arms us with data for our advocacy efforts.”

Among the survey results:

Most biotech firms in the U.S. are small businesses, with 90 per cent of respondents reporting they had fewer than 500 employees, and 58 per cent saying they had fewer than 50 employees. Only 19 respondents reported having more than 15,000 employees.
About 44 per cent of firms with 50 or fewer employees identified venture capital, angel investors and stock offers as sources of funding in 2001, while only two per cent of companies with more than 500 employees used those methods. Most large companies relied on in-house revenue for funding.
Seventy per cent of firms responding were established since 1986, with 29 per cent established between 1993 and 2001, indicating a relatively young industry poised for growth, according to Commerce Department officials.
Respondents seemed optimistic about their biotech efforts, with 75 per cent saying they expect competitive prospects for their business operations to improve “greatly” or “somewhat” over the next two years.
Detailed survey results are available at www.technology.gov/reports.