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Analysts Bullish on Biotech

The biotech industry saw its sales zoom by 18%, to $9.3 billion, in the 1996 fiscal year, according to an estimate released this week. This and other indicators, as well as the political climate in Washington, are fueling predictions from analysts that biotech will follow this success with a banner year in 1997.

Not all indicators suggest the industry is as healthy as it was in 1995, however. According to its latest report on the industry just posted to the World Wide Web, the accounting firm Ernst & Young of San Francisco found that new money flowing into the industry plummeted from $4.98 billion in 1995 to $3.46 billion in 1996. Dropping most precipitously were initial public offerings, which fell from 36, raising $935 million, in 1995 to just 14, raising $274 million, last year. Analysts say the shift reflects a general trend of investors steering their money into companies with proven track records rather than gambling on young companies.

Nevertheless, industry honchos remain optimistic. "I've become very bullish on the biotechnology industry and the commercialization of its products," says Henri Termeer, chief executive officer of Genzyme. For one thing, Termeer says, although biotech financing is down, one component--investment by pharmaceutical giants in small biotech firms--is up from $1.3 billion to $1.4 billion, suggesting that drug companies haven't lost their faith in biotech. In addition, he says, Congress may push for Food and Drug Administration reform measures that reduce the time and cost of bringing a drug to market.

And scientists are still flocking into biotech companies. In just 5 years, Ernst & Young estimates that the industry has grown from 66,000 to 108,000 employees. For specific regions in which companies are booming, see a report in Science's Next Wave.