Biotech to Lead Growth in 2008

Academia and Government

According to the American Association for the Advancement of Science’s preliminary analysis of the US’ fiscal 2008 budget (see IBO 12/31/07), federal spending for R&D will increase by only 1.2%, but a 15.7% increase in spending is allocated for R&D capital equipment and facilities.

France’s budget gives a 7.8%—or €1.88 billion ($2.66 billion)—boost to French research and higher education for 2008 (see IBO 9/30/07). The UK’s 2007 Comprehensive Spending Review allocates £5.6 billion ($11.4 billion) in research funding to the Department of Innovation, Universities and Skills and £3.7 billion for the Department for Environment, Food and Rural Affairs for 2008–09 (see IBO 10/15/07). Germany’s Ministry for Education and Research will receive €9.4 billion ($13.7 billion) for 2008, a 9.8% increase. The Japanese science budget for fiscal 2008 is ¥3.57 trillion ($32.5 billion), up 1.7%, but research spending at state universities will decrease 1.9% and has been declining annually for several years. The South Korean Ministry of Science and Technology stated this month that South Korea’s 2008 R&D budget will increase 11.1% to SKW 10.8 trillion ($11.5 billion).


According to Burrill & Company, there were 28 new biotech IPOs launched in 2007, which raised a total of $2 billion; however, 60% of these IPOs ended the year below their opening share prices. For US biotech companies, financing and partnering deals generated nearly $45 billion. For 2008, Burrill predicts that more than 30 IPOs will be launched, US biotechs will raise $50 billion and the rapid pace of mergers and acquisitions will continue unabated.


The American Chemical Council’s report, published in December 2007, predicts that production in the US chemical industry will increase 2.1% in 2008, up from 1.3% growth in 2007. Worldwide output in the chemical industry is expected to grow 4.3% in 2008, up slightly from 4.1% growth in 2007. Capital spending by US companies, which reached $23.8 billion in 2007, is forecast to increase 6.3% to $25.3 billion and R&D spending, which totaled $27.1 billion in 2007, is expected to rise 4.4% in 2008. In December 2007, VCI, the German chemical industry association, said that it expected chemical production in the country to increase 2.5% and sales to increase 4.5% in 2008. In 2007, production growth was estimated at 4.5% and sales growth at 7.5%.


An October 2007 Short Range Outlook by the International Iron and Steel Institute predicts that apparent steel use will increase by 6.8% in 2008, matching 2007’s growth rate. BRIC (Brazil, Russia, India and China) accounted for 41% of world steel demand in 2007 and demand from these nations is expected to grow 11.1% in 2008 after growing 12.8% in 2007. The International Copper Study Group forecasts worldwide copper mine production to increase 7.6% in 2008, following 5.1% growth in 2007.

Oil and Gas

The Energy Information Administration’s (EIA) December 2007 “Short-Term Energy Outlook,” estimates that global oil demand in 2008 will grow by 1.6 million barrels per day. For 2008, the EIA estimates that non-OPEC oil production will increase approximately 0.9 million barrels per day and OPEC crude oil capacity will increase by 1.4 million barrels per day. According to a December 2007 survey of 344 energy companies by Lehman Brothers, the companies plan to increase their spending on exploration and production by more than 11% to $369 billion in 2008. Spending growth this year is expected to come from a variety of sources after being dominated by Russian and Middle Eastern companies in 2007.


IMS Health’s October 2007 forecast (see IBO 11/15/07) predicts that the pharmaceutical market will grow 5%–6% in 2008 to $735–$745 billion, down from 6%–7% growth in 2007. Japan is predicted to drop to 1%-2% sales growth in 2008, down from 4%–5% growth in 2007. The fastest-growing regions in 2008 will be the “pharmerging” markets in China, Brazil, Mexico, South Korea, India, Turkey and Russia, which are expected to grow by 12%–13% to $85–$90 billion as a whole in 2008. Generics are expected to continue their strong growth in 2008, with 14%–15% growth, up slightly from the 13%–14% growth projected for 2007.


According to the Semiconductor Equipment and Materials International Capital Equipment Consensus Forecast, sales in the semiconductor equipment market will drop 2% in 2008, after growing 3% to reach $41.68 billion in 2007. In 2008, the market for testing equipment will increase 8.0% to $5.91 billion after dropping 14.7% in 2007. Taiwan overtook Japan as the largest market, growing 28.9% to $9.42 billion in 2007, but is expected to drop 6.9% in 2008. The only expected gainer in 2008 is Europe with 2.0% growth, following an 11.7% drop in 2007. Gartner predicts that capital spending in the semiconductor industry will drop 9.9% between 2007 and 2008, down significantly from the 6.8% increase between 2006 and 2007.

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