Beyond borders: biotechnology industry report 2013

Point of view

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Almost five years after the global financial crisis, are biotech companies adequately prepared for the rapidly changing, evidence-driven reality of health care?

To explore this question, we undertook a survey of US and European biotech executives. The results, based on responses from 62 companies with revenues below US$500 million, reveal an interesting divide between how companies are approaching matters of efficiency and matters of evidence.

Our findings indicate an “implementation gap” at most small-to-mid-size companies when it comes to gathering evidence to demonstrate the value of products under development. This implementation gap has implications for the ability of these companies to raise capital, obtain attractive deal valuations and be successfully reimbursed for their drugs upon approval.

While most respondents consider all of the strategic imperatives "important" or "very important" ...

Matters of evidence

… they are much more focused on implementing matters of efficiency than matters of evidence

they are much more focused on implementing matters of efficiency than matters of evidence

Points of resistance in biotech

Why is this happening? Despite near-universal recognition of the importance of demonstrating value, many biotech companies do not think these trends will appreciably affect their businesses in the near future.

There are several points of resistance:

Confront the points of resistance

Myth 1. This is only relevant for commercial-stage companies
Strategic and financial investors want evidence that will be compelling to payers.
Are you entering negotiations with the data they want — or the data you have?
Myth 2. We can't afford this
Investing in evidence doesn't have to be expensive — and could well be a prudent use of resources.
Yes, you can afford to do this. More important, can you afford not to?
Myth 3. Strong science will always get paid for
Payers aren't paying for science — they are paying for value.
Can you demonstrate how your breakthrough adds economic value to the system?
Myth 4. This won't affect my disease segment
Nobody is immune from these trends.
Do you understand how they will affect your business?
Myth 5. These trends won't become real in the near term
Change is coming faster than many might have expected.
Are you moving forward — or assuming that time is on your side?

Guiding principles for demonstrating value

To succeed, companies will need to revisit their approaches to R&D. It will be imperative to monitor evolving standards of care.

A model we call the “value pathway” can help identify the biggest unmet needs or failures that payers will be most focused on. Companies will then need to align their offerings to fill these “value leakages” and design clinical trials to develop evidence that is compelling for payers.

Companies of all sizes and focus areas can take steps today to invest in the type of evidence that will be compelling to investors and payers. Such steps could include engaging stakeholders earlier on issues of value and reimbursement, rethinking trial design and exploring pre-competitive data alliances.

To succeed in the evidence-driven systems that are fast approaching, biotech companies – regardless of their size, segment or stage of development – will need to recalibrate R&D and commercialization based on five guiding principles:

Embrace the new guiding principles

Principle 1. Define your value proposition
  • Even in early development, seek to understand your product's contribution and why payers would value it
  • Solicit input from key stakeholders
  • Refine your value proposition as your product moves through phases of development
Principle 2. Understand standards of care and value pathways
  • Understand the current and future standards of care
  • Map value pathways for individual diseases and understand the biggest causes of value leakage
  • Prioritize value leakages that payers most care about
Principle 3. Identify new solutions for value leakages
  • Use approaches such as drug delivery technologies and personalized medicine to fill value leakages
Principle 4. Design relevant clinical trials
  • Consider head-to-head trials to influence comparative effectiveness research
  • Consider adaptive trials to identify responding subpopulations while using capital efficiently
Principle 5. Defend your product after launch
  • There is no finish line
  • Monitor evolving standards of care and be part of the conversation
  • Explore ways to conduct “value mining” by partnering with others

While most respondents consider all of the strategic imperatives "important" or "very important" ...

Matters of evidence

Source: EY survey of biotech executives. Chart shows respondents' answers to the following question: "How important are the following strategic imperatives for continued success in today's biotech industry?" No respondents selected "Very unimportant."


… they are much more focused on implementing matters of efficiency than matters of evidence

  Already implemented Very likely Likely Unlikely Very unlikely
Matters of efficiency
Raise capital more aggressively from financial investors 57% 12% 9% 21% 2%
Outsource operations to reduce costs 38% 9% 22% 24% 7%
Discontinue product candidates because of insufficient funding 38% 7% 18% 30% 7%
Spin out non-core assets 20% 9% 25% 31% 15%
Conduct layoffs/downsize facilities 39% 4% 9% 26% 22%
Matters of evidence
Discontinue product candidates that might not exceed current standard of care 24% 26% 24% 21% 5%
Add payer/reimbursement expertise to management team 11% 14% 21% 45% 9%
Add payer/reimbursement expertise to clinical development teams 13% 5% 20% 50% 13%
Add payer/reimbursement expertise to board of directors 4% 5% 14% 54% 23%

Source: EY survey of biotech executives. Chart shows respondents answers to the following question: "Since the start of the financial crisis, has your company taken, or are you planning to take, the following initiatives?"