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The 10 biggest events shaping biotech in 2006

As we are still in January, it is a good time to look back at 2006 to identify some of the key events that shaped the biotech industry and its development, particularly in the Midwest.

Here's my list, in order of importance: biofuels, stem cells, BIO 2006 in Chicago, the reshaping and resurgence of Abbott Labs, biogenerics in the U.S., the internationalization of Indian pharma, Food and Drug Administration product approvals, nanotechnology financing, the globalization of biotech, and the convergence of the drug, devices, and diagnostics/imaging industries.

Some of you will say, upon reviewing this list, that these are not new issues and appeared before 2006. I will, of course, agree with you; however, during 2006, a confluence of events surrounding each of the topics elevated them to center stage.

In analyzing the impact of each of the above points, I am going to start, Letterman-like, in reverse order.

Convergence of drugs, devices and diagnostics/imaging
My fellow columnist Ogan Gurel has written extensively this year about this topic; in fact, the addition of his column to the ranks of ePrairie is in part recognition of the need to cover a greater spectrum of the life-science industry. When we take into account that the three currently separate industries generate annual revenue of over $800 billion, and that the drug portion is the largest with over $600 billion in annual revenue, there is a lot of money at stake in attracting new, non-traditional players such as GE, Siemens, Toshiba, and Philips. They previously were known as leaders in other industries such as aircraft engines, light bubs, computers, and consumer electronics.

End-of-the-year announcements by both GE and Siemens were symbolic of this convergence, with the announcement of GE acquiring Abbott's in vitro diagnostics business for over $8 billion, and Siemens' acquisition of Bayer's diagnostics business and Diagnostics Products Corp. (in July, 2006) for € 5.7 billion (about $7.35 billion), which sent shock waves through the industry.

Companies such as Johnson & Johnson and Abbott are well positioned in all three industries. Medtronics, the largest medical device company, is moving increasingly toward convergence, as are other medical device companies. Both Abbott and Medtronic have been working ardently on a “closed-loop” system for control of diabetes, which includes diagnostic testing and an insulin pump that automatically sends insulin into the patient based on the read-outs from the diagnostic apparatus. This system eliminates a patient's need to complete separate, individual activities such as testing and treatment.

Globalization of biotech

Although the U.S. still maintains its lead in this critical industry, and the U.S. still has the lion's share of product sales and income, it is basically flat in new company development (in terms of actual numbers). The U.S. has maintained the same level of biotech companies over the last few years, approximately 1,500, compared to about 1,500 in Europe, 1,500 in Asia, and another 400 to 500 in Canada. The U.S. still has the largest stock markets for biotech companies, but it is beginning to lose ground in biotech initial public offerings as IPOs are taking place in several European countries, Israel, India, Australia, and Japan.

This is not to say that there is no new company formation in the U.S. - there is, but companies also fail and are increasingly acquired by larger companies. The point is that biotech is no longer just a U.S. phenomenon. As I reported throughout the year, the growth of biotech in countries such as Switzerland, China, Israel, Korea, and Japan, is staggering, and I was personally able to witness this through my trips.

Nanotechnology financing

I wrote about this earlier, as at least four Midwest nanotech companies raised over $110 million in venture capital financing in 2006, including: Nanosphere, $57 million; NanoBio, $30 million; NanoInk, $20 million; and Nanotope, $3.5 million. Interestingly, three of the four companies were spun out of Northwestern University's Institute of Nanotechnology.

This is truly amazing and yet these deals are not the only “nano” financings, as other companies such as Polyera, Advanced Diamond Technologies, Nanodisc, and Ohmx also raised money through government funding as well as investor financings. There seems to be a wave of new nano companies spinning out of Argonne, University of Illinois-Urbana/Champaign, and the University of Michigan.

FDA product approvals

It was a dismal year at the FDA, as just 18 new drug products were approved, the lowest level in at least the last five years! And the last five years represent a decline over the previous years, which on average had 30 to 35 new drug approvals per year. Nevertheless, the FDA, despite a lot of political and legal pressure, approved the first biogeneric (see below).

Internationalization of Indian pharma

The top Indian pharma companies - Cipla, Dr. Reddy's, Ranbaxy, Sun Pharma, etc. - took advantage of fire sales by “Big Pharma” in selling off key assets in Europe (as a result of consolidation). Indian pharma is following the lead of Israeli generic leader Teva Pharmaceuticals, which has aggressively gobbled up companies in Eastern Europe, Mexico, and the U.S. to cobble together the world's largest generic company. But guess what? Teva also is beginning to transform into an R&D-based specialty Pharma company with expertise in neuroscience and oncology. The Indians seem to be watching this model carefully and mimicking it.

Biogenerics in the U.S.

Part and parcel to the earlier point, and led by the world's second largest generic company, Novartis, is the approval of the first biogeneric, human growth hormone under a non-traditional method of approval - the FDA's 505(b)2 regulations versus the traditional ANDA (abbreviated new drug approval process) process for generics. You can be sure that the key Indian manufacturers are studying this strategy carefully for market entry into the U.S.

Several billions of dollars are at stake as some of the first major biotech blockbusters now have their patents expired, but because the approval process for a biologic (as biotech drugs are known) has not been clarified by the FDA, companies have been able to ward off generic sales.

Reshaping and resurgence of Abbott Labs

Abbott Labs continues to go through major business plastic surgery. Just a few years after jettisoning off its low margin hospital products, Hospira, 2006 saw an aggressive winning bid not only for a significant piece of Guidant's cardiovascular device business, but also an equity piece of Boston Scientific - all in the same deal. Abbott topped off the year with another aggressive acquisition of Kos Pharmaceuticals, a cardiovascular drug specialty pharma company, and almost in the same breath, disposal of its in vitro diagnostics business.

No, Abbott has not exited the diagnostics business - it still has its molecular diagnostics business and the glucose monitoring business. Wall Street seemed to applaud Abbott's M.O., as the company's stock increased 23 percent with a market cap of about $74 billion. In the first three weeks of 2007, Abbott's value has an increased another eight percent and has crossed the $80 billion threshold.

BIO- 2006 Chicago

The first time this event was held in the Midwest raised a lot of doubts within the BIO organization about veering off the traditional choices for this meeting, the East and West Coasts (with occasional interludes in Toronto). However, the Midwest BIO was a huge success, breaking all the attendance, partnering, and financial records, including more state governors (12), more countries (62), and more exhibit space.

The meeting also broke new ground in several areas, such as expansion of biotech from drugs to agricultural, diagnostics and medical devices, and key participation of universities like Northwestern, the University of Chicago, and the University of Illinois in the program for the first time. The event was so successful that Chicago already got the event back for 2010, the fastest that this has been achieved to date.

Stem cells

In a grass roots effort to reject the Bush Administration's recalcitrant position on what promises to be the most exciting area of stopping and reversing - and possible curing - the progression of many major diseases, many states took legislative initiatives to accelerate the finding and development of new stem cell-based research and therapies. Not bad considering that Wisconsin was the forerunner of much of this research, and holds a number of key patents. The promise of stem cell-based therapy is still early but exciting, and it may change the course of therapy as we know it.


The explosion of the biofuels business created not only a number of IPOs during 2006, but soaring of the stock of Archer Daniels Midland, a biofuels leader. The value of these new wave energy companies rose and fell in relationship to the price of world oil prices. As world oil prices rose, so did the value of these companies; when global oil prices dropped, rapid deflation in the value of the biofuels companies occurred.

Nevertheless, the rapid proliferation of biorefineries throughout the Midwest has lead to a new leadership position in this segment of the biotech industry, and the best is still yet to come in this field. According to a U.S. Department of Agriculture/Department of Energy joint study, the U.S. could produce 60 billion gallons of ethanol by 2030 through a combination of grain and cellulosic feedstocks - enough to replace 30 percent of projected gasoline demand - without harming food, feed, or fiber production.

According to BIO, processing just 30 percent of U.S. corn stover into biofuels would reduce U.S. greenhouse gas emissions by the equivalent of 90 to 150 million metric tons of carbon dioxide annually. Another study by the University of Tennessee showed that producing 25 percent of America's energy from agricultural resources would generate in excess of $700 billion annually in economic activity, create 5.1 million jobs, and add $180 billion to net farm income by 2025.

For those of you who scoff at this, when I visited Brazil during 2006, I personally witnessed how this country had harnessed biotechnology with their sugar cane crop to become self sufficient in gas. Even President Bush jumped on the biofuels bandwagon in his 2007 State of the Union address when he established America's “Twenty in Ten” goal, or stopping the growth of U.S. carbon dioxide emissions within the next 10 years by requiring the production of 35 billion gallons of renewable and alternative fuels by 2017. This is five times the amount called for in the current law for 2012.

The Midwest should and will lead the U.S. in the development of these alternative fuels. It is for this reason that I have chosen this area as the number one impact on U.S. biotech during 2006.

See you soon!

Previous articles by Michael Rosen

Michael Rosen: A Midwest small-cap, life-science surprise package

Michael Rosen: 2006: A mixed blessing for Midwest life science companies

Michael Rosen: 2006: A great biotech financing year, unless you were going public!

Michael Rosen: Financing life science: The ongoing saga

Michael Rosen: Midwest gaining stature in nanotech research

Michael S. Rosen is president of Rosen Bioscience Management, a company that provides CEO services, including financing and business and corporate development to start-up and early-stage life science companies such as Renovar and Immune Cell Therapy. Rosen also is a founder and board member of the Illinois Biotechnology Industry Organization. He can be reached at

The opinions expressed herein or statements made in the above column are solely those of the author, and do not necessarily reflect the views of Wisconsin Technology Network, LLC.

WTN accepts no legal liability or responsibility for any claims made or opinions expressed herein.


Sierra Leone, Metro Manila responded 8 years ago: #1

I am really excited. This will be my first time visiting, good work. Good stuff!

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