Ernst & Young has released a report identifying the top 10 strategic risks facing biotechnology companies over the next 5 years. The report consolidates the views of leading industry analysts across various disciplines within the biotechnology sector.

The key risks identified in the report are pricing pressures and access, raising capital, strategic alliances, demonstrating value, product development and clinical trials, regulatory compliance, monitoring drug safety, protecting intellectual property, accessing talent and harnessing emerging markets.

The report defines strategic risk as one which could cause severe financial loss or fundamentally undermine the competitive position of a company. Interestingly, threats emerging from the general geopolitical and macro-economic environment are not viewed as significant to the biotechnology industry.

In what will no doubt cause some debate, Ernst & Young has ranked the strategic risks in order of priority. However, for individual biotech companies, the rankings are less meaningful than a general awareness and appreciation of the risks. In addition, the identified risks likely will not come as a surprise to participants in the biotechnology sector. However, it is important for companies to consider and address each of the risks at an early stage, increasing the odds that nasty surprises can be reduced and expensive directional changes avoided.

Although many of the challenges and issues apply to biotechnology companies wherever they reside, the report is understandably primarily focused on the U.S. market. For example, the report identifies pricing pressures as the number one risk due to the concern that price controls may be introduced in the U.S. In the BIOTECanada/PricewaterhouseCoopers Canadian Life Sciences Industry Forecast 2007, life sciences companies identified their key barriers to success as accessing capital, attracting and retaining key employees (particularly non-scientific managerial talent) and finding licensing or strategic partners. While Canadian biotechnology companies identify generating positive cash flow as an issue, they do not identify price controls per se which are already a feature of the Canadian regulatory system.

Biotechnology companies should be identifying and addressing their strategic risks as part of their overall objectives and plans. The Ernst & Young report serves as a welcome addition to what should be ongoing dialogue, discussion and debate within the biotechnology industry.

For a copy of the Ernst & Young Report, please see:  

For a copy of the BIOTECanada/PricewaterhouseCoopers Canadian Life Sciences Industry Forecast 2007, please see: