12:00 AM
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May 31, 2010
 |  BioCentury  |  Finance

Advancing But Frugal

BioCentury annual survey details funding needs of European biotech through 2012

The rippling effects of the global economic crisis and the knock-on downsizing of risk capital is forcing European biotechs to scale back their spending plans, even as an increasing number have moved into clinical development or have reached the market with new products.

BioCentury's eighth annual financial survey of European biotechs with products in the clinic and beyond shows that the demand for money over the next three years has not changed even though the number of companies with clinical programs and products on the market has grown.

Each year's survey projects the money required to provide three years of runway for companies in the clinic, or have a product on the market.

For 2010, private and public European companies in the clinic and beyond will need €3.5 billion ($4.8 billion) to fund their operations through 2012. This compares to €3.3 billion ($4.5 billion) in the 2009 survey, which saw companies ratchet down their spending in response to the economic crisis (see "2010: Demand Is Up . . ,").

Although the demand is slightly higher this time around, the number of European biotechs in the clinic and beyond has grown by 11% to 266 from 239 in 2009. More importantly, the number of companies likely to need to raise money to support their operations to the end of 2012 is up 15% to 207 from 180 in 2009.

This means the financing needed to build three years of runway has fallen 8% to €16.9 million ($23.4 million) per company from €18.3 million ($24.9 million) in 2009 (see ". . . But Anticipated Burn Rates Are Falling").

Indeed, the 2010 average is even lower - a 16% falloff - than the €20.2 million ($30.6 million) recorded in the 2008 survey.

Even with this reduced need, the question is whether the private and public capital markets are prepared to accommodate this clinical-stage group.

In 2008, the answer was "no," as European biotechs in the clinic or with a drug on the market raised a meager €950.7 million ($1.4 billion), compared to the €3.2 billion ($4.8 billion) average annual cash draw forecast by the iceberg survey earlier that year.

Last year, the group rebounded to raise €3.6 billion ($5 billion), which included €2.3 billion ($3.2 billion) collected in offerings by UCB Group and Elan Corp. plc. But even matching the residual €1.3 billion ($1.8 billion) over the next three years would bring in €3.9 billion ($5.4 billion), which would surpass the €3.5 billion in total forward-looking demand estimated in this year's survey (see "Clinical Rationing," A16).

Private demand

In the private space, the BioCentury survey projects the aggregate funding demand will be €2.2 billion ($3 billion) to build three years of runway -...

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