The 34th edition of the Ernst & Young LLP (EY US) Beyond Borders report finds US and European biotech companies are seeing early signs of a thaw in the financing and dealmaking environment.
Change in fiscal policy by lowering the interest rates in the months ahead can accelerate this positive shift within the second half of the year. In addition, the pressing need to replenish the revenue of big pharma to counteract the loss of exclusivity of products totaling more than US$300 billion, and continued scientific innovation, will drive the sector forward by meeting unmet medical needs.
For the last two years, the industry saw significant challenges around a constrained financing environment, leading to many emerging and early-stage biotechs having to restructure their operations by cutting staff, merging with other companies or narrowing R&D focus by shelving some of their pipeline assets.
Arda Ural, PhD, EY Americas Life Sciences Sector Leader, says:
„Despite the Federal Reserve delaying action on interest rates, biotechs still have grounds for continued cautious optimism. The combination of record-level dealmaking capacity seen throughout 2023, firepower of big pharma and the healthy innovation capacity of the sector, including possibilities from artificial intelligence, will ultimately help the biotech sector to not only survive but thrive in the mid- to late-term.“
Revenues still reflect pandemic’s one-time historical comparisons: While the aggregate sector revenue was down for a second consecutive year, historically it trended upward at 4.8% per year for the last decade. Between 2015-2021, it grew at 9.2% per year, due to the spike from the COVID-19 vaccine and therapeutics launched in 2021.
Breaking away from this long-term secular trend, the revenue decreased in 2023 along with the decline in pandemic medication sales. We believe the revenue level will return to its historical trend, once free of these pandemic-related disruptions.“
Innovation remains robust: In 2023, the U.S. Food and Drug Administration (FDA) approved 80 novel biopharma products across the Center for Drug Evaluation and Research (CDER) and the Center for Biologics Evaluation and Research (CBER), representing one of the highest total approvals matched only by 2018. The enthusiasm about vaccines, mRNA-based technologies and autologous cell therapies (ACTs) have been replaced by cardio-metabolic products, especially GLP-1 receptor agonists, radiopharmaceuticals and antibody-drug conjugates (ADCs). Oncology and immunology are still the top of the therapeutic areas in terms of investment, and neuroscience is quickly emerging based on the tremendous unmet need within the therapeutic area.
https://www.ey.com/en_us/life-sciences/biotech-outlook
