Deep financing challenges separate haves and have-nots and accelerates move to sustainable models
BOSTON, May 5 /PRNewswire/ -- Despite worldwide economic turmoil, the global biotechnology industry delivered a solid financial performance in 2008, according to Beyond borders: Global biotechnology report 2009, Ernst & Young's 23rd annual report on the biotech industry. However, the prolonged and systemic funding drought is placing the business model that fueled biotech growth for the past 33 years under unprecedented strain. The report released today says that four sweeping, "paradigm-shifting" trends should lead to new, more sustainable ways of funding drug development: a wave of generic drugs based on today's top blockbusters, the expansion of personalized medicine, fundamental healthcare reform in the United States, and the continued globalization of the industry.
"This is not business as usual for the biotech industry," said Glen Giovannetti, Ernst & Young's Global Biotechnology Leader. "Unlike prior funding droughts, this crisis is systemic, deep and protracted. To thrive in this environment, firms will need to bring the creativity that has long been the industry's hallmark to establishing more durable models for funding innovation."
Key financial results;
"Like firms in most markets, European biotechs were clearly impacted by the financial crisis," said Jurg Zurcher, Ernst & Young's Biotechnology Leader for Europe, Middle East, India and Africa. "Many are scrambling to raise capital, restructure operations and use deals creatively to survive. Consolidation seems inevitable."
New pathways to sustainability
The challenge for the industry, according to Beyond borders, is turning an existential threat into a Darwinian opportunity. The potential solution lies in four paradigm-shifting trends that promise to accelerate the transition to sustainable business models:
Generics: Generics based on today's top blockbusters should loosen governments' and insurers' budgetary constraints and mitigate pricing pressures on innovative drugs, permitting better margins.
US healthcare reform: The potential shift toward universal healthcare coverage in the world's largest drug market will likely incorporate pay-for-performance in reimbursement decisions. Incentives for true innovation should help biotechs sustain returns.
Personalized medicine: Personalized medicine will increase the relative value of research and early development -- biotech's traditional strengths -- giving biotechs more bargaining power and better valuations. Meanwhile, more efficient drug development will lower R&D costs, making it easier for firms to make the journey to self-sufficiency.
Globalization: Growing strengths in emerging markets will facilitate creative solutions -- from new "win-win" ways of allocating increasingly valuable ex-US rights to creative alliances and new sources of capital. Meanwhile, Asian business models could provide solutions for struggling Western firms.
"But these trends will also bring new market pressures -- from a higher bar on reimbursement to new sources of competition. To seize the opportunities in these four drivers, companies need to be proactive," says Giovannetti. "Firms should understand how these trends impact them, prepare for them, and where possible, help shape them."
Key regional findings
About Ernst & Young's Global Biotechnology Center
Today's rapidly changing biotechnology industry is delivering new levels of health, prosperity and sustainability. But it is also facing unprecedented challenges. Ernst & Young's Global Biotechnology Center brings together a worldwide team of professionals to help you achieve your potential - a team with deep technical experience in providing assurance, tax, transaction and advisory services. The Center works to anticipate market trends, identify the implications and develop points of view on relevant industry issues. Ultimately, it enables us to help you meet your goals and compete more effectively. It's how Ernst & Young makes a difference.
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|SOURCE Ernst & Young|
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