The biotech industry enjoyed a leap in revenues last year, but growth was concentrated mainly in larger companies with sales of more than $500m a year, according to a new report.
The latest instalment in Ernst & Young’s Beyond Borders series of reports suggests that companies in established biotech centres – the US, Europe, Canada and Australia – saw overall revenues climb 10 per cent to $98.8bn.
Most of the gains came from US firms, which grew 13 per cent to almost $72bn in revenues last year. In Europe, growth was less impressive – up 3 per cent to around $21bn – but the sector performed better in terms of improving profitability.
Overall, net income for the sector slipped back but this was because R&D spending “rebounded forcefully”, rising 14 per cent with the US once again leading the charge with a 20 per cent increase.
Perhaps the most encouraging statistic for biotech in 2013 was a sharp uptick in funding, with companies in the US and Europe raising $31.6bn last year. This is the second highest amount since 2003, up from $28.7bn in 2012. All told, 50 companies went public, raising $3.5bn which was three times up on the prior year.
The latest edition of E&Y’s report is entitled Unlocking Value, and by that measure the findings are less encouraging.
“Most biotech companies operate in a resource-constrained environment, increasing the need to conduct R&D in capital-efficient ways,” it says. R&D “remains a central … point of value leakage for biopharmaceutical companies”, largely because the failure rate for drugs in phase III is still too high at around 40 per cent.
Meanwhile, a trend towards alliance deals in which companies are paid milestones for commercial success rather than trial results – along with increased use of market entry agreements in which payers reimburse companies on the performance of their products – is making life harder for biotech companies.
The E&Y report says biotech firms need to catch up with their big pharma peers and increase the adoption of adaptive trial designs so they can “reallocate R&D dollars in real time based on data generated in the clinic”, and increase the development of biomarkers and targeted therapies to reduce risk in R&D.
It also calls for greater participation by biotechs in cross-industry collaborations in areas such as clinical trial methodologies and real-world data capture which at the moment are being driven by big pharma. Examples include the TransCelerate BioPharma and Project DataSphere initiatives which are short on participation from smaller biotechs.
“Adaptive trials, precision medicine and precompetitive collaborations have the potential to unlock additional value that is trapped in the pipelines of biotech companies,” concludes the report.