US biotechnology companies have seen a 17% increase in sales to $13.4 billion, a 16% increase in revenues to $18.6 billion, and 9% increase in employees to 153,000 in 1998, according to Ernst & Young's (Palo Alto, CA) 13th Biotechnology Industry Annual Report titled "Bridging the Gap." Biotechnology drug approvals have steadily increased over the past few years, with more than 20 drugs either approved or recommended for approval in 1998. And there are more than 300 drugs currently in phase II/III and phase III trials, nearly double the 1997 figure. Yet public financing has dried up and biotechnology stock indices have lagged behind other industrial sectors. "There's so much interest in the software and internet sector right now...that's where the money is flowing," says John Taggert, partner at Ernst & Young Life Sciences. Additionally, consolidation in the financial industry has resulted in larger investment funds, and many smaller companies do not warrant investments. Approximately 250 biotechnology companies have market capitalizations less than $250 million, and difficult times are predicted for these. "Either the market will sway and there'll be more interest in small-cap stocks or else there'll continue to be more and more consolidation and shakeouts in the sector," says Scott Morrison, coauthor of the report.
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