Biotechnology outpacing pharmaceutical growth

Wood Mackenzie's 2004 Executive Guide states the leading biotechnology companies have evolved into integrated companies, retaining ownership of their developmental compounds and substantially growing their revenue streams in the process.

Amgen is now ranked among the top 20 global pharmaceutical companies in the world and will break into the top 10 by 2008. In addition, the report notes that five of the 10 largest mergers and acquisitions in 2003 were within the biotechnology sector, indicating continued growth and maturity.

Wood Mackenzie​ life sciences president Jim Hall said: "Biotechnology companies have truly come into their own."​

"As biotechs increasingly retain ownership of their developmental compounds and create more targeted blockbuster drugs, they will grow faster than pharmaceutical companies."​

Of the top 10 mergers and acquisitions completed in 2003, 5 were transactions within the biotechnology sector. The largest biotechnology/biotechnology deal of 2003 was the $6.8 billion (€5.5 billion) merger of Biogen and Idec to form the third-largest global biotechnology company, Biogen Idec.

Other significant deals in the last year have been Amgen's acquisition of Tulari for its small-molecule pipeline and discovery capabilities (valued at $1.3bn) and Genzyme's acquisition of Ilex Oncology for oncology products and development expertise (valued at $1bn).

However, in the most significant acquisition deal to date (valued at $2.6bn), the United Kingdom's largest biotechnology company, Celltech, became the acquisition target of European midcap pharmaceutical company UCB. Celltech offers UCB technology platforms and experience for the development of biological drugs.

The ongoing battle between biological therapies and small molecules took on a more prominent role during 2004 with biological therapies (recombinant proteins and monoclonal antibodies) growing in prominence in the marketplace.

Analysis of the market revealed that 13 of the 76 blockbuster products in 2003 are biologicals, and there are several other products (Humira, Rebif, Synagis, and Betaseron) that are forecast to attain blockbuster status by 2005.

During 2004, three novel monoclonal antibody drugs, Genentech's Avastin (for cancer), ImClone/BMS/Merck KGaA's Erbitux (for cancer)received FDA approval. Biogen Idec/Elan's Antegren (for multiple sclerosis) awaits FDA authorisation having filed a New Drug Application (NDA) in mid-2004. All three biological therapeutics are forecast to attain blockbuster status by 2008, compared to four new small-molecule drugs that will be launched in 2004.

The report focused on the threat of biogenerics as the single biggest threat to the biotechnology industry. Regulatory authorities are facing a major challenge in defining how potential follow-on biologics should be demonstrated. Due to the significant investment required to gain regulatory approval for biogenerics, first-to market biogeneric will initially command high prices. As additional biogeneric products enter the market, similar price erosion will follow the patent expiration of small molecules.

In 2003, licensed products accounted for more than $70 billion in revenues for the top 20 global pharmaceutical companies. The figure is expected to exceed $95 billion by 2007. In the past 15 years, licensing has become a key strategy for growth, with some pharmaceutical companies using licensing as core business development strategy.

The report concludes that following steady growth from 1989 to 2000, the market for licensing has declined in terms of number of deals even as the value of revenues from deals has increased. Specifically, late-stage licensing has slowed significantly since 2001, and the number of preclinical deals has also declined.

The slowdown in what is a prosperous market has, according to the authors, due to competitive licensing. Late-stage deals and even preclinical agreements are too expensive for many companies to consider.

Large pharmaceutical companies are increasingly turning to deals in proof-of-concept and Phase I/II compounds, a cheaper investment, but a riskier deal in terms of potential success.

With pharmaceutical companies struggling to maintain R&D productivity, biotechnology companies present opportunities to enhance product pipelines. The oncology sector dynamics, with its array of indications, specialist nature of the market, and biotechnology companies focusing on this area, mean oncology deals represent the greatest proportion of licensing deals over the last fifteen years.

Genentech/Roche's Rituxan is a key example of the commercial potential for targeted oncology products, even with the drug's narrow indications.