Financing and investor confidence in biotech's hopes and dreams helped spawn many of today's world-class biotech powerhouses, such as Amgen and Genentech. The product successes of these companies are a major reason why the industry turned a profit in 2008. But the majority of the industry's biotech companies still remain a work in progress.
Biotech 2009 shows how quickly the financial crisis affected the 357 publicly listed biotechnology companies. Almost 60% have seen their market cap fall to well below $100 million. In addition, over 100 North American public and private biotech/pharmaceutical companies to date have announced a corporate restructuring by slashing staff and putting promising projects on ice.As of the end of February 2009, there was no evidence that the restructuring and refocusing strategies of the majority of biotech companies was slowing down. The more mature and blue-chip biotech companies have so far weathered this period quite well because they have plenty of cash, product revenue streams, strong pipelines, and Big Pharma partners. Investors view these large-cap companies as safe havens. However, even these companies are not immune to the macroeconomic environment in which they operate.
Many of biotech's elite companies took a major hit to their share values in the wake of President Barack Obama's call to expand healthcare coverage and curb costs by providing access to cheaper generic versions of biotechnology drugs, cutting Medicare payments to private insurers, allowing consumers to buy cheaper medicines from overseas, and preventing drug companies from making deals that block generics competition. The budget plan, released on February 26, seeks massive savings to pay for a major healthcare overhaul.
It was high on President Obama's agenda during his presidential campaign and so it should not have come as a surprise to anyone that the budget plans of his administration put healthcare costs directly in its cross-hairs. However, it appears it did and during the last two trading days of February, investors sold off healthcare shares big time on fears that the proposal would sap industry profits.