RESEARCH TRIANGLE PARK, N.C. – The U.S. biotechnology industry is well on its way to profitability for the first time, and most CEOs at biotech firms are willing to partner to leave red ink behind.

Those are among the high points in the just released annual biotech industry survey from Ernst & Young.

In a survey of more than 400 CEOs at biotechs of all sizes, two messages were clear: Dealing with other companies for assistance in sales and services is a top priority, and product co-development is gaining popularity.

Here’s a remarkable statistic: 99 percent of the CEOs of U.S. firms in the survey said they plan to enter “deals” over the next two years with sales and marketing assistance leading the list. (Inspire Pharmaceuticals in the Triangle is an example of building sales forces to help sell other firm’s products.) The percentage is only slightly lower in Europe – 87 percent.

Plus, 52 percent of CEOs are intent of forging partnerships to help bring drugs to market. That’s up from 29 percent of products that are marketed through partnerships currently, according to E&Y. (Pozen and GlaxoSmithKline’s deal to bring the migraine drug Trexima to market is an example.)

And while profitability continues to escape most biotechs, the mood among CEOs is extremely optimistic. E&Y reported that 68 percent of execs in the survey plan to introduce new products over the next two years, and 94 percent of the CEOs say they are hiring.

Overall, the E&Y “Beyond Borders” report is very positive.

"The industry in the US has never been stronger and we’re seeing its success story spreading to other parts of the world — particularly Europe," said Glen Giovannetti, Ernst & Young’s Global Biotechnology Leader. "Time will determine whether these trends will be sustained, but there’s reason for optimism. Innovation is being rewarded with record revenues and unprecedented premiums in M&A transactions."

In a press release about the report, E&Y summed up its findings reporting “robust growth” in “virtually every performance indicator:”

In a press release about the report, E&Y summed up its findings reporting “robust growth” in “virtually every performance indicator:”
• “Deal values soared, with alliances involving US companies totaling US$23 billion — an all-time record — while high premiums (the difference between the price per share paid by a buyer and the company’s share price before the deal was announced) drove the value of mergers and acquisitions (M&A) to the second-highest level in the industry’s history.

• “Capital raised by the world’s biotechnology companies grew by a massive 42%, to US$27.9 billion. Venture capital (VC) reached US$5.4 billion, an all-time high.

• “Global public company revenues grew by robust double-digit rates and crossed the US$70 billion threshold for the first time. Double-digit revenue growth was achieved in Canada (22%), the US (14%) and in Europe (14%).

• “Net losses of publicly traded companies fell by 37% in Europe and 43% in Canada, creating momentum toward profitability. While the US sector saw increased net losses, this was due primarily to large transaction-related charges in a year of unprecedented deal activity; in the absence of these, the US industry would have been profitable in aggregate for the first time, and the global industry would have had its lowest net-loss ever.

• “US product approvals increased from 33 in 2005 to 36 in 2006. New drug application (NDA) and biologic license application (BLA) approvals grew from 21 to 25. In Europe, product pipelines of public companies grew significantly.”