April 15, 2007 / 11:02 PM / 13 years ago

Biotech revenues top $70 bln as M&A premiums soar

LONDON, April 16 (Reuters) - Revenues of the world’s publicly-traded biotech companies topped $70 billion for the first time last year and the sector’s success is being rewarded by record premiums in M&A deals, according to a new report.

Ernst & Young, whose annual review is widely followed in the industry, said on Monday soaring prices being paid for assets reflects biotechnology’s now pivotal position in drug discovery.

The average takeover premium paid in transactions worth more than $500 million was 60 percent last year — more than twice the average M&A premium paid between 2003 and 2005.

Around world globe, pharmaceutical giants like Pfizer Inc. (PFE.N), AstraZeneca Plc (AZN.L), GlaxoSmithKline Plc (GSK.L) and Novartis AG NOVN.VX are increasingly anxious to acquire biotech businesses to help bolster in-house drug pipelines.

There is also a growing recognition that biotech firms often have the most promising know-how for developing new medicines, which has driven a new interest in early-stage platforms and technologies rather than just late-stage products.

“We now have widespread recognition among buyers of the potential value in biotech’s platforms and pipelines,” Glen Giovannetti, Ernst & Young’s global biotechnology leader, said.

“The industry in the U.S. has never been stronger and we’re seeing its success story spreading to other parts of the world — particularly Europe.”

Revenues of public biotech firms grew 14 percent to $73.4 billion in 2006 and the industry raised $27.9 billion worldwide, compared to $19.7 billion in 2005.

Venture capital funding alone hit $5.4 billion, an all-time high.

The United States remains the bedrock of the biotech industry and the sector there is now approaching aggregate profitability. But Europe and Asia are also growing fast.

William Powlett Smith, Ernst & Young’s UK biotech head, said the European biotech sector — which has so far brought only a handful of products to market — had bounced back in 2006. Its market capitalisation increasing 43 percent to 62.1 billion euros ($84.11 billion).

The smaller Asia-Pacific biotech sector, meanwhile, has seen particularly strong revenue growth of 46 percent in the past year to $3 billion.

Looking ahead, Ernst & Young predicted the global industry was on track to achieve revenues of $100 billion before 2010.

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