Industrial biotech sector facing slowdown challenges

21 July 2009 07:52  [Source: ICIS news]

MONTREAL, CANADA (ICIS news)--The industrial biotechnology sector has been affected by the slowdown in venture capital investments and limited access to cash, business heads said late on Monday.

In a panel discussion organised at the BIO World Congress on Industrial Biotechnology and Bioprocessing conference in Montreal, US-based biotech companies such as Genomatica, Elevance Renewable Science, Codexis, Myriant and US bioplastic company NatureWorks agreed that the sector had significantly been affected by the current global economic situation.

"I don't know anybody in the industry, whether small or large, that has not been impacted by limited access to capital or cash," said Elevance's CEO KLynne Johnson.

"Still there are great opportunities that are emerging even at times like this. We see more government efforts in increasing stimulus funding for renewables as we see increase urgency to find non-petroleum substitute to replace chemicals and materials," she added.

Codexis CEO Alan Shaw said the increasing consolidation within the industrial biotech sector was resulting from the credit crisis much like what happened years before when pharmaceutical companies started gobbling up health biotech companies.

Myriant chairman and CEO Stephen Gatto noted the importance of world governments' role in creating and cementing investments for pilot plant programmes.

Natureworks CEO and president Mark Verbruggen said that the governments' policies allowed industrial biotech companies to take the first step in reaching economy of scale.

However, Genomatica CEO Christophe Schilling cautioned that long-term business plans could not be built around the governments' policies.

"The governments' policies or subsidies is a way to be opportunistic but we need to make sure business models make sense without the requirement of government intervention, subsidies, cap and trade or things of this nature," said Schilling.

US consulting firm McKinsey & Company estimated continued funding issues for biotech companies over the next couple of years as gross domestic product (GDP) levels worldwide struggled to return to the levels that they were a year ago.

Bill Caesar, principal from McKinsey, also noted patent activities in the industrial biotech sector were slowing down as well.

"There are reasons to believe that funding issues are going to be significantly impacted over the next couple of years," Caesar said.

The good news was that the key drivers such as growing demand for green solutions and continued government objectives to reduce dependencies on petroleum oil would carry the companies out through the recession, he added.

The challenge was how companies managed themselves through this period, Caesar said.

The three-day industrial biotech conference ends on Wednesday.

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