Investment, Profitability And Biotechnology

A financial definition distinguishing pharmaceutical companies from biotechnology firms is often more appropriate than a scientific one, according to Tim Wilson of UBS Securities. He told those attending the Wall Street Forum's institutional investor conference that a pharmaceutical company develops new drugs using its own money while a biotechnology company uses that of its investors.

Of the 269 currently publicly-traded biotechnology firms, only eight are now profitable. As the industry grows, the proportion of profitable companies will remain at about the same level, he said. All the twists in the drug development process are material information for investors in this sector, and this information greatly influences how Wall Street sees the industry.

There are about 1,000 products in development by the publicly-traded biotechnology firms, with 144 now in Phase I trials. Of these, only around 10% have a chance of making it to the market, he said. Of the 205 products now in Phase II, about 30% may reach the market, and each of the 127 in Phase III has a one-in-two chance of being approved by the US Food and Drug Administration, according to Mr Wilson.