Beyond Borders 2016

Biotech financial performance

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Financial performance: biotech financials return to earth in 2015

The biotechnology industry once again enjoyed record performance in 2015. The tide of readily available capital for new and established public biotechs and a strong M&A market continued to sustain the industry’s positive momentum for much of the year.

Revenue, R&D spend, net income and total market capitalization all reached historic highs. Scientific innovation in key therapeutic areas, such as immuno-oncology, and regulatory successes, especially around drugs that treat rare diseases, continued apace.

But even as the industry notched records in key financial metrics, signs of slowing growth in these same indicators, coupled with the swift erosion of public market support, also suggest biotech’s wave of unprecedented success may have crested. In the latter part of 2015, pricing concerns continued to weigh down the industry due to payers’ challenges to biopharmaceutical reimbursement in the US.

Key financial performance insights

The EY biotech survival index tracks the number of years of cash companies have on hand. In 2015, these figures remained largely unchanged for the US and Europe, reflecting the easy access to capital that biotechs enjoyed throughout most of 2015. The capital markets tightened amid the late-2015 and early-2016 biotech slump.

EY - Survival index chart

The number of US and European commercial leaders, defined as those companies with at least US$500 million in revenue, held steady in 2015 at 28. In the US, the number of companies fell from 19 to 17 as a result of the acquisitions of Cubist, Salix, and Pharmacyclics and the demotion of The Medicines Company as its revenues eroded when Angiomax lost patent protection. These shifts were partially offset by the addition of Cepheid and Emergent BioSolutions to the commercial leaders group.

Overall, 15 of the 17 US commercial leaders grew their top lines, though aggregate revenue growth dropped significantly from 2014 (15% versus 31%) and non-commercial leaders enjoyed better market cap performance in 2015.

At the front of the pack, Vertex Pharmaceuticals saw its revenue increase 78% in 2015 due to the launch of cystic fibrosis combination therapy Orkambi and a 36% increase in sales of its existing CF portfolio. Incyte Corporation and Regeneron also enjoyed increased sales of their respective treatments, Jafaki for myelofibrosis (up 68%) and Eylea for age-related macular degeneration (up 54%).

In Europe, two companies joined the ranks of commercial leaders, taking the tally there from 9 to 11. Horizon Pharma, which redomiciled to Ireland in 2014, saw its revenue soar 155% to US$757 million in 2015 as a result of its acquisition of Hyperion Therapeutics. Meanwhile, specialty drugmaker BTG’s revenue jumped 18% to US$562 million. Among all European commercial leaders, 7 of 11 companies boosted their top lines, up 10% in aggregate to US$21.4 billion. This total comprised 85% of all European biotech revenue in 2015.

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