“Companies will need to operate more efficiently and demonstrate health outcomes.”
The 25th anniversary issue of Beyond borders highlights familiar themes, while looking at new pressures on the business model.
The global biotech market
In 2010, the biotechnology industry delivered solid top- and bottom-line growth. It achieved aggregate profitability for the second year in a row.
Yet funding for research and development has grown increasingly scarce for the vast majority of firms in the sector. This has placed new pressure on the traditional biotech business model, and may reshape how companies pursue R&D in the future.
We take a closer look at these elements:
What you need to know
The results highlighted in the Beyond borders 2011 include:
♦ Record-breaking profitability: Companies in the industry's established biotech centers of Australia, Canada, Europe and the US had a record-breaking aggregate net profit of US$4.7 billion, a 30% increase from the previous year.
♦ Aggregate funding rebounds: Companies in Canada, Europe and the US raised US$25 billion in 2010 — equaling the average for the four years before the global financial crisis.
♦ Funding for innovation declines: In the US, large debt financings by mature, profitable companies grew by 150% over 2009. Conversely, there was a 20% decline in the amount of “innovation capital” for the sector, defined as total funding minus large debt financings.
♦ More skewed funding: 82.6% of funding went to just 20% of US companies, up from 78.5% in 2009. The bottom 20% of companies raised 0.4% of funds, down from 0.6% in 2009.
♦ Alliances remain strong, but not up-fronts: The total potential value of strategic alliances remained strong, totaling more than US$40 billion. However, up-front payments from partners to biotech companies dropped 37 percent to US$3.1 billion.
♦ Deal making slows: Merger and acquisitions (M&As) involving European or US biotech firms dropped sharply from 58 deals in 2009 to 45 deals in 2010, while the aggregate value of these transactions remained relatively flat (after normalizing the 2009 numbers to exclude the mega-acquisition of Genentech).
The report identifies four complementary approaches for biotech companies to sustain innovation in this increasingly challenging environment:
- Prove it or lose it.
- Do more with less.
- Build new competencies.
- Collaborate for coordinated action.