Key financial trends that shape biotech business growth
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ywords: fully integrated and emerging biotech companies, genomics
Marketspace Key financial trends that shape biotech business growth Alex Pavlou and Mark Belsey Date received: 29th October, 2004
Abstract Datamonitor analysis has identified two key company categories currently shaping the biotech industry: the leading biotherapeutics players and the emerging biotherapeutics players. Analysis of financial trends of companies in these categories from 2001–2003 has revealed that, despite strong revenue growth recorded by the leading biotherapeutics players, highly variable cost bases strongly affected net profits. Conversely, the emerging biotherapeutics players saw a decline in revenue growth, due to a reduction in collaboration or licensing revenue. Both leading and emerging biotherapeutics players strongly increased R&D spend over this period. Future growth of the leading and emerging biotherapeutics sectors will be driven primarily by M&A/licensing agreements, and in-house pipeline development driven by continued strong R&D spend.
INTRODUCTION
Alex Pavlou Datamonitor Healthcare, Charles House, 108–110 Finchley Road, London NW3 5JJ, UK Tel: +44 (0) 20 7675 7079 Fax: +44 (0) 20 7675 7500 E-mail: [email protected]
After nearly three decades of biotechnology funding cycles, the industry is undergoing a fundamental change that will necessitate the creation of radically new business models. Biotechnology’s vertical model is representative of the business created by the leading or fully integrated biotech players (market cap recorded in October 2004 ranging from US$3.6 to US$72bn). It consists of an integrated organisational structure with access to independent development, manufacturing and marketing capabilities. Datamonitor has also identified a second group of companies led by ten emerging biotherapeutics players (market cap recorded in October 2004 ranging from US$0.8 to US$1.7bn) which are attempting to advance their pipelines based on their in-house developed innovative technological platforms (eg antibodies, oligonucleotides or small molecules). However these companies are not able to independently market or fully
develop any of their lead products. Sales and marketing capabilities, together with strong revenue growth is what determines investor confidence and funding, two of the key factors in determining stock performance. (Figure 1).
FINANCIAL TRENDS FROM THE LEADING PLAYERS Income and R&D investment analysis Total revenues from the top ten biotech companies increased from US$12.3bn in 2001 to US$21.4bn in 2003 (Figure 2). The largest revenue increase in terms of absolute sales was generated by the market leader Amgen, driven by its leading recombinant therapeutic proteins Aranesp (darbepoetin alfa), Neulasta (pegfilgrastim) and Enbrel (etanercept). Genentech recorded the second largest 2003 revenues, due to strong oncology franchise growth, driven by its therapeutic antibody Rituxan (rituximab). Amgen recorded the second strongest revenue compound annual growth rate (CAGR) during 2001–2003, behind
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