The global biotechnology industry raised $21.2 billion last year, a 15 percent increase over the capital raised in 2003, according to a report published Wednesday.

The annual global biotechnology report by Ernst & Young said the U.S. industry is performing well while European biotechnology companies still face huge challenges.

American biotechnology companies raised $16.9 billion last year, a significant increase from 2003’s $14.4 billion. The figure is second only to financing raised during the high-tech bubble of 2000.

Global revenues rose 17 percent as regulatory agencies approved 20 new biotech drugs in the U.S. and nine in the European Union. During 2003, U.S. biotech companies received 18 approvals and European companies won just six.

The number of drugs from American companies in the final stage of clinical trials grew to 365 in 2004 from 290 in 2003. Meanwhile, venture capital financing hit a record-breaking $3.6 billion.

Scott Morrison, head of Ernst & Young’s U.S. biotechnology section, said the U.S. industry has hit a “critical mass.”

“The biotech sector has reached significant market capitalization while staying attractive to investors with its growth potential,” said Mr. Morrison.

While the figures suggest that U.S.-based companies are doing well, those in Europe have been struggling. Biotech companies that have recently gone public in Europe have stumbled in the public markets (see Renovo Poised for IPO).

While the region’s total revenues from biotechnology remained at €11 billion ($13.4 billion), public company sales slipped 5 percent to €5.5 billion ($6.7 billion). However, the European industry is picking up. The net loss from public European companies was €392 million, 19 percent less than in 2003.

“Despite turning the corner, the European biotech industry is still facing huge challenges,” said William Powlett Smith, head of Ernst & Young’s British biotech section. “The regulatory environment is getting tougher and more complex. On the funding side, the early-stage segment is facing smaller funding rounds, which constrains opportunism and growth.”

There are 25 different national drug-pricing bodies in Europe.

The report also notes that biotech hotbeds are appearing in Japan, China, and India. The Asia-Pacific region saw 17 IPOs in 2004, almost double Europe’s total of nine.