The biotech industry has shrunk dramatically in recent years based primarily on the continued tight capital markets and increased aversion to risk on the part of investors. As a result, scores of small companies have shut down operations and closed their doors. The number of public biotech companies in the U.S. has decreased by 25% since January of 2008. Venture capital investing in the sector also has declined dramatically since 2007 and the venture capital climate remains largely stagnant for biotech companies.
The IPO window does not seem to offer much hope. The IPO window creaked open earlier this year but remains tough and selective with companies taking, on average, 30% less than their asking price to lure cautious investors.
The overall impact of the severe drought of investment funds will be fewer biotech start ups which translates to a dramatic decline in innovation, inhibiting future progress to develop cures and breakthrough treatments for diseases such as cancer, heart disease, Alzheimer’s, and diabetes among others.
Essentially, the biotech industry will be less entrepreneurial than it is today.
Based on the desperate need to transform the funding environment, BIO set out last year to identify the changes that needed to be made to overcome the challengesfacing small biotech companies. Thought leaders and others within and outside of the industry provided suggestions and input on potential game-changing strategies. The result of that rigorous policy development process is BIO’s long-term strategic plan, which is designed to unleash the promise of biotech.
The policy proposals and regulatory reforms included in the strategic plan are designed to help speed life-saving treatments to sick and suffering patients in a safe and expedited manner. Currently, the average time between treatment discovery and availability to a sick and suffering patient is 10-15 years and costs upwards of $1 billion.
BIO’s proposed reforms encourage innovation through private investment in fields of biotechnology that are critical not only to our personal health - but, also to the nation’s economic health. In addition, the proposed reforms address support for the development of agricultural products, vaccines to defend against bioterrorism and revolutionary biofuels that could transform society.
These reforms would help America compete on a level playing field against China and India – and defend and maintain the leading position of the U.S. in biotech innovation while keeping high-paying jobs here at home.
The proposals in the strategic plan will be turned into legislative language – and BIO will work with Congress to pass laws designed to create a new environment designed to fight disease – not the cure.
As the U.S. continues to struggle with complex issues – reducing federal spending, creating jobs, reducing health care costs, curing diseases, finding alternative sources of energy, and more – biotech holds the promise to provide solutions. The industry needs support to deliver on this promise by encouraging innovation and addressing the current capital formation challenges.
For more information on the “Unleashing the Promise of Biotechnology” legislative proposals, visit http://www.bio.org/sites/default/files/PromiseofBiotech.pdf.