The biotech industry, a key cog in New Jersey's economy, is spending more on research and development, aided by rising equity markets.
Publicly traded biotech companies spent 8 percent more on research and development in 2012, compared to a 4 percent increase the prior year, according to an annual study from BDO USA LLP, a Chicago accounting and consulting organization with offices in Woodbridge.
BDO based its findings on regulatory filings recently submitted by 120 companies represented in the Nasdaq Biotechnology Index. The companies reported spending $54 million on R&D in 2012, up from $50 million in 2011 and $48 million in 2010.
Ryan Starkes, partner and leader of the life sciences practices at BDO, said the combination of need and opportunity is driving the increase.
Starkes said the rising stock market, and corresponding growth in initial public offerings, comes while many companies seek additional funds as they shift into more expensive clinical trials required to get products to market.
"The appetite is clearly there on the investors' side," Starkes said. "Cash is coming in and the companies are putting cash to use and investing in their science and product development."
According to Renaissance Capital, 23 biotech IPOs have been completed so far in 2013, posting an average return of 48 percent.
Starkes said New Jersey biotech companies are generally in line with national trends. He said his office has seen increased demand for IPOs, partly because the new federal law, JOBS — for Jumpstart Our Business Startups — has eased reporting requirements for early-stage companies.
The increase in research and development comes while sales are generally rising at biotech companies, who reported an average 13 percent revenue jump in 2012.
But large biotechs — defined as $50 million to $300 million in revenue — mostly are responsible for the increase. Large companies saw a 28 percent rise in revenue, while smaller biotechs, defined as $50 million or less in revenue, reported a 27 percent decline.
Starkes said the results simply reflect that larger companies are more likely to have more products on market with more commercial traction.
Despite the decline in revenue, small biotechs are increasing commitment to R&D. Smaller companies posted a 9 percent increase in average R&D spending, plus research and development spending as a percentage of revenue increased to 215 percent in 2012 from 143 percent in 2011.
"Unlike big pharma companies, who are developing new products while maintaining a consistent level of R&D spending, biotechs continue to demonstrate a desire to increase their R&D investment," Stakes said.
Still, losses for biotechs continued to mount in 2012, according to BDO. On average, companies reported a $50 million loss, up from $36 million in 2011. Most small companies, 98 percent, posted losses, compared to 72 percent of large companies.