Clare FarrantSenior Communications ManagerEY+64 9 274 899 firstname.lastname@example.org
Auckland, 19 MAY 2009 – Despite worldwide economic turmoil, the global biotechnology industry delivered a solid financial performance in 2008, according to Beyond borders: Global biotechnology report 2009, EY’s 23rd annual report on the biotech industry. However, the prolonged and systemic funding drought is placing the business model that fueled biotech growth for the past 33 years under unprecedented strain. The report released today says that four sweeping, paradigm-shifting trends should lead to new, more sustainable ways of funding drug development: a wave of generic drugs based on today’s top blockbusters, the expansion of personalized medicine, fundamental healthcare reform in the United States, and the continued globalization of the industry.
“This is not business as usual for the global biotech industry,” said Jon Hooper, EY’s New Zealand’s Biotechnology Leader. “To thrive in this environment, firms need to bring the creativity that is the industry’s hallmark to establishing more durable funding models, and New Zealand is ahead of the game in that respect.”
“While New Zealand is still considered an emerging market in the biotechnology industry, it is maturing in terms of its ability to work within its constraints. A significant challenge facing the industry has always been access to capital and this has prepared the industry to deal with the current funding drought. New Zealand-based companies are ahead of the curve in embracing creative approaches to overcome traditional obstacles: geographic isolation, limited sources of funding and a small domestic market,” says Hooper.
“Creative solutions adopted by some New Zealand companies include building effective non-competitive partnerships and alliances and providing early access to new technologies that generate revenue early for biotech companies. We also have a number of early stage biotech companies which have funding commitments in place and are continuing with research and development pre-commercialisation. These companies will not be impacted as adversely by increased pressure on funding in the short term,” says Hooper.
Key financial results;
“Like firms in most markets, European biotechs were clearly impacted by the financial crisis,” said Jon Hooper. “Many are scrambling to raise capital, restructure operations and use deals creatively to survive. Consolidation seems inevitable.”
New pathways to sustainability
The potential solution lies in four paradigm-shifting trends that promise to accelerate the transition to sustainable business models:
Generics: Generics based on today’s top blockbusters should loosen governments’ and insurers’ budgetary constraints and mitigate pricing pressures on innovative drugs, permitting better margins.
US healthcare reform: The potential shift toward universal healthcare coverage in the world’s largest drug market will likely incorporate pay-for-performance in reimbursement decisions. Incentives for true innovation should help biotechs sustain returns.
Personalized medicine: Personalized medicine will increase the relative value of research and early development — biotech’s traditional strengths — giving biotechs more bargaining power and better valuations. Meanwhile, more efficient drug development will lower R&D costs, making it easier for firms to make the journey to self-sufficiency.
Globalization: Growing strengths in emerging markets will facilitate creative solutions — from new “win-win” ways of allocating increasingly valuable ex-US rights to creative alliances and new sources of capital. Meanwhile, Asian business models could provide solutions for struggling Western firms.
These trends will also bring new market pressures — from a higher bar on reimbursement to new sources of competition.
“To seize the opportunities in these four drivers, companies need to be proactive,” says Hooper. “Firms should understand how these trends impact them, so that they can prepare for them, and where possible, help shape them.”
Key regional findings
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About EY’s Global Biotechnology Center
Today’s rapidly changing biotechnology industry is delivering new levels of health, prosperity and sustainability. But it is also facing unprecedented challenges. EY’s Global Biotechnology Center brings together a worldwide team of professionals to help you achieve your potential – a team with deep technical experience in providing assurance, tax, transaction and advisory services. The Center works to anticipate market trends, identify the implications and develop points of view on relevant industry issues. Ultimately it enables us to help you meet your goals and compete more effectively. It’s how EY makes a difference.
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