As healthcare shifts to a new value-based focus, Big Biotech companies are demonstrating they are better positioned than their pharmaceutical industry counterparts to meet changing demands, according to an analysis by Burrill & Company. Big Biotech has outpaced Big Pharma in terms of growth of sales, income, investment in R&D, and market cap during the past three years, the financial services company reports.
"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," says G. Steven Burrill, CEO of Burrill & Company.
“But 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," he says.
Big Biotech enjoyed a 57% increase in market cap for the three years ending Dec. 31, 2012 as the total value of the group climbed to $260.6 billion from $160.1 billion at the end of 2009. That compared to a 17.4% increase for Big Pharma during the same period as the market cap for the group climbed to a collective $1.257 billion from $1,070 billion.
"The big jump in the value of Big Biotech companies is not just a matter of investor speculation," says Burrill. "These companies have had significant clinical and market successes that have driven their values higher."
Net income for Big Biotech jumped 23.3% during the three-year period to $11.0 billion from $8.9 billion. That compared to just a 1.1% increase for Big Pharma, as its net income rose to $96.4 billion from $95.4 billion.
Revenue growth for Big Biotech grew 40.6% to $48.6 billion at the end of 2012 from $34.3 billion three years prior. That compared to just a 17% increase for Big Pharma as revenue rose to $526.8 billion from $450.1 billion during the same period.
The growth in revenue for Big Biotech has been reinvested into increased R&D spending, which has grown 38.8% to $10.3 billion. That's more than triple the 11.7% increase in R&D spending by Big Pharma during the period as spending reached $76.3 billion at the end of 2012, up from $68.3 billion.
"As Big Pharma looks to replace revenue lost to patent expirations, it is looking to biotech breakthroughs to make up the gap," says Burrill. "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."
The analysis is based on data from the S&P Capital IQ database. Big Pharma companies included Johnson & Johnson, Pfizer, Roche, Novartis, Merck, Sanofi, Novo Nordisk, GlaxoSmithKline, Bayer, Eli Lilly, Bristol-Myers Squibb, and AstraZeneca. Big Biotech companies used in the analysis included Amgen, Gilead Sciences, Biogen Idec, Celgene, Alexion Pharmaceuticals, Regeneron Pharmaceuticals, Shire, Vertex Pharmaceuticals, BioMarin Pharmaceutical, Elan, and Onyx.
Burrill will discuss trends in the industry and the themes in his book, Biotech 2013-Life Sciences: Capturing Value at the BIO International Convention on Tuesday, April 23 at 2 p.m. at McCormick Place in Chicago.