Biotechnology Industry on the Brink: Healthcare Reform and Agricultural Demands Will Drive Growth

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The $92.4-billion Biotechnology industry has only tapped a small fragment of its many potential applications, according to new findings from IBISWorld, the nation’s largest publisher of industry market research. The undeveloped nature of biotechnology exposed it to the recent economic downturn, but the nascent industry is anticipated to recover during the five years to 2016. During this period, IBISWorld forecasts that revenue will increase at an average annual rate of 9.6% to $146.2 billion. This number includes growth of 10.0% in 2012. Continued merger and acquisition (M&A) activity and favorable legislation will be key growth drivers, while environmental concerns and an aging population will also drive demand for industry developments.

IBISWorld Market Research

IBISWorld Market Research

The healthcare reform paves a clear path for generic biological drugs and provides tax breaks for smaller biotechnology operators

The $92.4-billion Biotechnology industry has only tapped a small fragment of its many potential applications, according to new findings from IBISWorld, the nation’s largest publisher of industry market research. The undeveloped nature of biotechnology exposed it to the recent economic downturn, but the nascent industry is anticipated to recover during the five years to 2016. During this period, IBISWorld forecasts that revenue will increase at an average annual rate of 9.6% to $146.2 billion. This number includes growth of 10.0% in 2012. Continued merger and acquisition (M&A) activity and favorable legislation will be key growth drivers, while environmental concerns and an aging population will also drive demand for industry developments.

According to IBISWorld, the US Biotechnology Industry is a relatively young industry with numerous opportunities for new applications. While recent developments have helped drive growth since 2006, they have failed to defend against the economic downturn. Revenue in 2008 and 2009 declined, but growth returned in 2010. In 2011, revenue increased 6.2% to $92.4 billion, which surpasses the average annual growth rate of 2.0% during the five years to 2011. New product development, a favorable regulatory environment, an aging population and access to capital have largely driven growth in industry revenue.

The Biotechnology industry had relatively easy access to capital prior to the recession, but it forced biotechnology companies to deal with low investor confidence and a cash-strapped government. While investor confidence declined in 2008 and 2009, the industry still received financing from venture capital due to promising technologies in the field. In anticipation of a less favorable capital market, biotechnology companies took considerable steps to reduce costs in 2009, including reduced research and development (R&D) expenditures. As a result, the industry experienced its first year of profitability.

Mergers and acquisitions (M&A) are increased during the five years to 2011, with the number of companies decreasing at an average annual rate of 1.8% to 1,689. As small companies integrate with larger operators, overall access to resources for R&D and marketing has grown. Biotechnology companies also benefit from continued federal funding for biological defense. Profit is projected to continue improving as M&A activity continues during the five years to 2016. Pharmaceutical manufacturers have acquired biotechnology companies in order to diversify product lines. This trend is effectively slowing growth in the number of industry operators, which is projected to remain flat during the five years to 2016.

According to IBISWorld analyst, Sophia Snyder, among other government programs, healthcare reform legislation will benefit the industry through 2016. “The healthcare reform paves a clear path for generic biological drugs and provides tax breaks for smaller biotechnology operators,” says Snyder. A favorable regulatory environment combined with an aging population and mounting environmental concerns will drive revenue, which is forecast to grow at an average annual rate of 9.6% to $146.2 billion during the five years to 2016.

For more information, download the full report from IBISWorld on the Biotechnology industry

About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.

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James Karklins
IBISWorld
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