Value-Based ‘Big Biotech’ Overtakes Big Pharma Growth
Big Biotech companies are demonstrating that they are in a better position than their pharmaceutical industry counterparts to compete in today’s more value-based healthcare market, says a new report.
The analysis comes from Burrill and Co, a financial services firm focussing on the life sciences, which has found that Big Biotech has outpaced Big Pharma in sales growth, income, investment and market cap over the past three years. Burrill and Co’s chief executive, G Steven Burrill, commented that “as the industry migrates away from an era of the one-size-fits-all blockbuster, the biotechnology industry's strength at developing innovative therapies that meet unmet medical needs and target the molecular mechanisms of diseases gives it an upper hand in creating value.”
Big Biotech’s market cap increased by 57% in the three year period ending in December 2012, and the total value of the group rose from $160.1 billion at the end of 2009 to $260.6 billion in 2012. Big Pharma experienced a smaller increase in market cap of 17.4%, going from a collective $1,070 billion to $1,257 billion in three years. However, Mr. Burrill pointed out that “The big jump in the value of Big Biotech companies is not just a matter of investor speculation - these companies have had significant clinical and market successes that have driven their value higher.”
These clinical and market successes are reflected in some of the other figures of the report. Big Biotech’s net income rose by 23.3% during the three year period, going from $8.9 billion to $11 billion. Strikingly, this compared to an increase for Big Pharma of only 1.1%, as its net income rose to $96.4 billion from $95.4 billion. At the end of the three years Big Biotech’s revenue growth had risen 40.6%, from $34.3 billion to $48.6 billion, while Big Pharma’s revenue increased by 17%, rising from $450.1 billion to $526.8 billion.
The report also highlights the way that Big Biotech is reinvesting this revenue growth back into R&D spending, which has risen by 38.8% to $10.3 billion. This is more than triple the increase in R&D spending by Big Pharma, which went up by 11.7% during the period, going from $68.3 billion to $76.3 billion. Mr Burrill predicts that in future Big Pharma will increasingly turn to biotech as a way to revitalise their pipelines, saying that “as Big Pharma looks to replace revenue lost to patent expirations, it is looking to biotech breakthroughs to make up the gap. It is biotech's products that will dominate the list of top-selling drugs for Big Pharma and be the most prized assets in their pipelines.” However, although Big Biotech’s products seem to represent more of a value proposition in today’s market, a fact recognised by their increase in market capitalization, Mr Burrill still avers the need for a good strategy and good relationships with stakeholders; “as pricing pressures become an increasingly challenging prospect for pharmaceutical and biotechnology companies alike, they will need to find new ways to build relationships with payers, providers and patients to capture value outside of their products.”
Since you're here...
... and value our content, you should sign-up to our newsletter. Sign up here