Biotech Industry Stable … For Now

The biotech industry is stable for now, but it won't be able to rely on big pharma for much buyouts in the next few years.

The state of the global biotechnology industry is looking strong, according to a new report from Ernst & Young. In 2011, for the second straight year, the industry has showed stable performance.

The accounting firm’s 26th annual biotech report revealed that established biotech markets enjoyed more than 10% in revenue growth in 2011. However, the industry needs to work on doing more with less.

“More than ever, the industry needs to remove duplication, encourage pre-competitive collaboration, pool data and allow researchers to learn in real time," Glen Giovannetti, Global Life Sciences Leader, said in a statement.

Companies in established biotech centers — the United States, Europe, Canada and Australia — achieved revenues of $83.4 billion in 2011, a 10% increase over 2010. And in 2011 R&D grew by a healthy 9%. Over the last two years R&D growth has been poor since spending was slashed in 2009 and in 2010 it only grew by 2%.

Although mergers and acquisitions were up in Europe and the U.S. from 49 deals in 2010 to 57 deals in 2011, big pharma played only a small role. In only seven of the 57 deals were big pharma a buyer, which is a troubling trend.

According to Ernst & Young’s Transaction Advisory Services, the “firepower” of the top 28 biopharmaceutical companies declined by about 30% between 2006 and 2011. And as patents expire over the next few years, that situation shouldn’t be expected to improve.

With drug development costs escalating, the industry needs a new drug development approach that is iterative, fast, adaptive, cost-efficient and open, according to Ernst &Young. The proposed solution are holistic open learning networks (HOLNets), so patient groups, providers drug firms and more could pool data and adapt rapidly.

“Disruptive reinvention is never easy,” Giovannetti said. “But, given the significant financial pressures facing most biotechs and other key health care players — payers, big pharma, investors — conditions have never been better for a HOLNet approach that leverages big data, real-time insights and the diverse strengths of a wide range of players."

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