Biotech Firms’ Market Value Up as Investors Ignore Red Ink

Although the biotechnology industry continues to generate huge losses, the market value of publicly owned biotechnology stocks jumped 75% to $35 billion through the year ended June 30, according to a study released Tuesday by Ernst & Young.

Since June, publicly held biotechnology companies have gained 10% in market value because of a wave of investor interest, said Steven Burrill, director of manufacturing and high-technology industry services for the accounting firm.

At the same time, biotech companies have been forming more slowly because start-up capital has become scarce, according to the study.

The increase in value comes even though publicly owned biotechnology stocks reported losses of $800 million during the 12 months surveyed by Ernst & Young. In total, private and public biotechnology companies lost $2.9 billion. The industry as a whole is not expected to become profitable until 1993, Burrill said.

The growing value of the industry is a result of increased product revenues, which grew 38% to $4 billion from the previous year. Twelve new drugs and vaccines have received federal Food and Drug Administration approval since June, 1990, nearly equaling the 13 approvals granted during the preceding eight years.

Among those products receiving FDA imprimaturs this year were Amgen’s erythropoietin, or EPO, and Neupogen, two drugs whose annual combined market is in the hundreds of millions of dollars. As a result, Amgen’s stock price has tripled since the first of the year, Burrill said.

The pipeline of new biotechnology drugs is relatively full: Twenty new drugs have cleared tests and are in position to receive FDA approval, and 100 more are in various stages of clinical trials, said Ernst & Young’s Kenneth B. Lee, the firm’s Life Sciences Industry Services director.