10 Points on Ernst & Young’s Biotechnology Industry Report 2014 ‘Unlocking Value’

1. R&D remains the central point of value leakage. Failure for drugs in phase III remains very high at 40%. This represents very inefficient use of capital as pursuing a drug candidate to this point is very expensive.

2. Value can be unlocked by biotech companies by the following 3 approaches:

– precision medicine, i.e. targeted therapies tailored to the patient’s individual condition

– adaptive clinical trials, i.e. modifying a clinical trial based on early patient reactions

– precompetitive consortia, i.e. using open learning frameworks.

3. Biomarkers can be used to mitigate drug development risk. They are a tool for managing biological complexity and can also make it easier to deal with regulatory complexity. Payers increasingly want confidence that the drug works in the population it is being used in.

4. Biotech companies need to acquire the following new capabilities:

– partnering early and often to gain missing skills

– empowering senior R&D leadership to allow them freedom to take the appropriate risks

– participate in precompetitive consortia to gain access to data from diverse sources and build relationships with other stakeholders

– prioritise evidence collection early on during the drug discovery process.

5. The biotech industry performed strongly in 2013 with revenues of the publically traded companies in US, Europe, Canada and Australia increasing by 10%. However a small group of US companies drove a lot of this this growth. R&D spending increased by 14% overall, a 20% rise in the US and a 4% drop in Europe.

6. The biggest drivers of growth were Biogen Idec, Celgene and Gilead Sciences. The US IPO class of 2013 added $662 million to the biotech industry’s revenues. The 17 largest US biotech companies accounted for $7.9 billion of the $8.2 billion increase in revenues, whilst the other 322 companies accounted for the remaining 4% in revenue growth.

7. Whilst Europe saw weak increase in revenues (3%) there was a strong growth income.

8. Of the 49 companies that went to IPO in 2013, 42 were therapeutics companies, 3 were diagnostics. Circassia’s debut on the London Stock Exchange have given hope to VC’s that markets in France and Switzerland may open up too.

9. Big pharma bolt-on acquisitions of biotech continues in 2013 though total deal value fell to $12.5 billion.

10. Only 27 new products were approved by the FDA. However both the FDA and EMA have launched programs making the regulatory process more responsive and user-friendly.

The report can be found here.

You may also be interested in related articles 10 Points on Open Innovation and 10 Points from Burrill’s Biotech Predictions for 2014.

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