The global biotechnology industry rebounded strongly in 2013, with public companies achieving double-digit revenue growth and a sharp increase in funds raised. However, much of the industry's growth was driven by a relatively small group of commercial stage companies, increasing the urgency for the rest of the industry to achieve greater efficiency in their drug development efforts. These are some of the key findings of Beyond borders: unlocking value, EY's 28th annual biotechnology industry report.
Glen Giovannetti, EY's Global Life Sciences leader, said, "The biotechnology industry, particularly in the U.S., is in the midst of a remarkable resurgence. Product successes have boosted revenues, drawn investors and motivated large companies to invest strongly in R&D. But the vast majority of firms continue to face a resource-constrained environment and heightened product scrutiny from payers and investors. More than ever, biotech companies of all sizes need to adopt strategies to capture more value from the discovery and development process."
Key results highlighted in the report include:
Despite the strong overall financial results, most biotech companies operate in a resource-constrained environment, increasing the need to conduct R&D in capital-efficient ways. Meanwhile, other trends—including market entry agreements in which payers reimburse companies based on the performance of their products or strategic alliances with milestones tied to commercial performance rather than clinical trial results—make it imperative for companies to better measure and capture the value that their products create.
The report identifies three strategies for unlocking value from R&D:
Kristin Pothier, EY's Life Sciences Commercial Advisory Services leader, said, "At a time when it is critical for companies of all sizes to conduct R&D as efficiently as possible, adaptive trials, precision medicine and precompetitive collaborations have the potential to unlock additional value that is trapped in the pipelines of biotech companies. To accelerate the adoption of these strategies, companies should embrace new kinds of partnerships to fill capability gaps, solve logistical issues and tap into the industry's impressive track record of adaptability in the face of new challenges."
The key findings of this report are based on an EY analysis of companies whose main business is the commercialization of modern biotechnology, focusing on biotech companies in North America, Europe and Australia. Primary research is based on an annual company survey as well as publicly available information (company reports, web sites, etc.) and is supplemented as needed with data published by third-party databases as well as regional information resources.
In the U.S., revenues of publicly traded biotechs were $71.9 billion in 2013, a 13% increase from the prior year and the best showing since the start of the global financial crisis. R&D spending increased by 20% in 2013 to $23.3 billion. Net income decreased by 42% in 2013 to $2.6 billion. Market capitalization increased 75% in 2013. Three-quarters of companies—220 in all—grew their market cap, 46 of them by over 250% and 102 by more than 100%. Total U.S. funding reached $25.3 billion in 2013, a 7% increase from 2012 and the second highest total since 2003.
Total M&A value rose 16% over 2012, to $28.6 billion, with the number of deals jumping from 34 to 41, the highest total since 2009.
Revenues of European public biotechs grew by only 3% in 2013, to $21 billion. R&D expense decreased by 4% in 2013, to $4.8 billion. Net income of public companies soared by 462% to $1.03 billion, with 84 public companies achieving gains on the bottom line. Market capitalization increased 44%; two-thirds of European companies saw gains in market cap. European funding increased by 34% in 2013 to $5.7 billion, the highest total since 2007. Almost half of the capital raised, $2.4 billion, came from debt. Europe enjoyed the best year for M&A since 2007. The total value of the 21 European M&A deals in 2013 was $19.6 billion, up 487% over 2012 and more than the previous five years combined.