Australian biotech sector grew 7% in 2012

The Australian biotechnology industry grew 7% in 2012 when measured by revenues of publicly listed companies, according to Ernst & Young’s latest Biotechnology Industry Report.

Revenues for the sector edged past US$5.05 billion ($4.88 billion), with growth as usual driven by CSL (ASX:CSL).

But combined net income fell 9% to US$777 million and the total number of publicly traded biotech companies fell by four to 54.

Across the world’s major biotechnology markets - Australia, North America and Europe - revenue from publicly traded companies grew 8% to nearly US$90 billion. Net income increased 32% to US$5.2 billion.

But growth for the year was dominated by the 16 biotech companies with annual revenues of over $500 million. Revenue was either flat or declined among the vast majority of companies in the sector which fall below this revenue threshold.

The report also shows that in Australia and internationally, R&D spending failed to keep pace with revenue growth. Australian public biotech companies spent US$636 million on R&D during 2012, up just 3% from 2011.

Globally, R&D spending increased 5% in 2012, well below the 9% growth rate from 2011. Here again, R&D spend by major biotechnology companies remained strong, while smaller, pre-commercial companies substantially reduced their rate of spending growth.

The report notes that R&D spending is a greater indicator of the health of the biotechnology industry than profitability.

Although the biotech industry became profitable in the wake of the 2008 financial crisis, this was a sign not of strength but of uncertainty and weakness in the sector, as companies were forced to dramatically cut costs to stay afloat.

In 2009, the sector’s R&D spending fell for the first time ever. While 2011 brought signs of recovery, Ernst & Young said the 2012 results show that the sector is not out of the woods yet.