Biotechnology Has Bright Future

October 31, 2000

Biotechnology will become this century's most dynamic industry -- affecting disciplines from agriculture to chemicals, drug discovery to computer nanotechnology -- creating platforms for new products and markets, according to a just released report. The report is titled "Convergence: Ernst & Young's Biotechnology Industry Report, Millennium Edition." Ernst & Young LLP will unveil the new study at the CALBIO Summit today in San Diego, CA.

The report says innovations and a convergence in finance, market sectors, technologies and products, and public awareness are breathing new life into biotechnology stocks. According to the study, in the first six months of 2000, 19 companies went public raising $2.2 billion with an average of $114 million per initial public offering (IPO). In the same period, follow-ons for 27 companies raised an additional $7 billion. The report also reveals that advances in genomics are directly tied to a rise in biotechnology stock prices, spurring investment and IPO activity. This is contrary to the company. s last report in 1999 titled "Bridging the Gap," in which Ernst & Young lamented that the market was severely undervaluing the biotechnology industry.

"For the full year ending June 30, 2000, market capitalization of the biotech industry was $353 billion, a 156 percent increase," states Scott Morrison, Ernst & Young's National Director of Life Sciences and an author of the report. "In the calendar year 2000, the industry is certain to raise in excess of $30 billion -- more than three times the 'best-ever' record of just under $9 billion."

Convergence -- the cross-industry spread of technology and market strategies -- is playing a larger role in the growth of the biotech sector and other industries than ever before. As noted in the report, convergence of the high technology and healthcare industries and with broader industrial sectors has led to a flood of new technologies, new company formations and new business models that have the potential to revolutionize the entire sector.

"In a meaningful way, the biotechnology industry is becoming an information science," added Morrison. The human genome project as well as the genomic and proteomic research efforts at academic institutions and biotechnology companies have generated vast amounts of data which will enable the drug discovery and development process as never before. Advances in computer technology have driven much of this progress with high technology companies now participating in the biotechnology revolution both as suppliers and through direct entry to specific markets.

"The biotechnology industry has become the intersection for convergence in the healthcare marketplace, helping to fuel our economy and accelerate the drug discovery process. As a result, new growth opportunities are created, while at the same time, improving the quality of life by bringing new medical therapies to the public," noted Morrison. As of June, according to the Ernst & Young report, biotechnology companies had almost 300 products in pivotal trials with cancer, infectious diseases and neurology studies leading the way. Advances in genomics, proteomics and the drug discovery process should lead to an explosion in the pipeline in the next decade.

New England, the San Francisco Bay area and San Diego have the largest concentration of public and private biotechnology companies with several areas of the country having increasingly larger concentrations. The companies do, however, vary greatly in size and market capitalization. "One thing of which we can all be certain is that biotech will continue to grow and affect our business ventures, our communities and our population. Those who can leverage and understand the opportunities at hand will discover unlimited possibilities," concludes Morrison.

To order a copy of "Convergence: Ernst & Young's Biotechnology Industry Report, Millennium Edition" at $50.00, call 800-SCOREEY (800/726-7339), code number O00254. You can also go to Ernst & Young's Web site at www.ey.com/industry/health to gain additional information on the concepts and companies highlighted in the report.