Promising waves for biotech performance eye- and recovery

Summary of highlights from EY’s new Beyond Borders report.

My colleagues at Ernst & Young LLP (EY US) recently published “Beyond Borders: EY Biotechnology Report 2022,” which provides a snapshot of the current state of the industry and its strong fundamentals. I am pleased to share their key findings here.

Despite the current longest and steepest bear market for the biotech index since its inception, the industry remains in a position of strength for an innovation renaissance with unprecedented levels of capital funding, driven by patients, fundamental performance and industry stability. offers a promising future for

With access to new capital in the public markets almost non-existent and with over 215 companies with less than 12 months of cash, it is imperative that the sector treads uncharted waters with discipline to stay the course, survive and prosper. navigates. Also, Big Pharma has the record firepower to invest in innovative biotechs through M&A, collaborations and partnerships, and these have always been the key pillars to achieve their growth goals.

A huge tide of dollars in venture capital and crossovers and dedicated biopharma funds are also waiting in the wings to fund lucrative opportunities. Biotechs must actively take control of their fortunes and manage cash, prioritize programs based on their likelihood of success and ROI, and retain the talent needed for execution. It is on these metrics that the industry is likely to be increasingly bifurcated.

Here are some additional details that the report reveals:

Blowout revenue growth in 2021. Public company revenue rose 35% to $216.7 billion from $160.2 billion last year, and while largely driven by COVID-19 vaccines and antivirals, most companies beat revenue expectations and raised guidance across the board .

A tectonic shift in the financing environment, from hero to zero. In 2021, the industry raised $115 billion in capital, down only 4% from its record-breaking 2020 performance. About $30 billion was invested in IPOs in this two-year period, accounting for 29%. The total number of dollars raised for the sector in IPOs over the past 15 years. Valuations hit record highs in February 2021, but then the reopening of the economy, facilitated by vaccines, led to a fierce rotation from costly growth areas to depressed value areas, which are most vulnerable to an impending V-shaped economic recovery. There was more leverage. This acceleration, coupled with rapid rise in interest rates and inflation, drove biotech valuations—and their doors to access the capital markets—certainly and loudly shut in 2022.

Biotech remains the engine of the biopharma industry for innovation and growth. More than 50 new molecular entities (NMEs) were approved by the FDA in both 2020 and 2021, up from the annual total of 29 a decade ago. Currently, the biotech is in active development with a record 65% of the nearly 6,000 clinical-asset candidates. That group includes more than 2,000 cell and gene therapies, which are projected to play an increasingly important role in driving revenue growth over the next decade.

“Since the start of the pandemic, biotechs have experienced significant growth with the advent of mRNA vaccines, antivirals, the virtualization of clinical trials, and more,” says Arda Ural, PhD, EY Americas industry market leader, Health Sciences and Wellness. Huh. “In parallel, the large cap biopharma industry is facing a fundamental growth gap as their internal pipelines are not sufficient to achieve their growth goals in the event of upcoming patent expirations for their major blockbusters. With a massive improvement in the valuation of deal-targeted development-stage biotechs and record firepower in their balance sheets coupled with a huge improvement in the valuation of deal-targeted development-stage biotechs, now is an opportune time for Big Pharma to capture biotech innovation Is. ,

Ashwin Singhania, Principal, Ernst & Young LLP, at EY-Parthenon Life Sciences Strategy Practice, says, “Biotech executives must have a clear vision of what they want to achieve in order to be successful after the pandemic. The market downturn coupled with the unprecedented public health crisis demonstrated the biotech’s resilience, but now companies must address pain points to optimize their potential. ,

With largely low valuations and few financing options, a buyer’s market has finally emerged. Risk-free, late-stage biotech assets that fit naturally into a big pharma’s strategic pipeline will be an M&A priority, and strategic alliances are best placed to reach high-risk early-stage innovations over outright bolt-on acquisitions. remain the preferred route. A more robust and quick deals calendar seems inevitable.

Barbara Ryan Founder, Barbara Ryan is a member of the Editorial Advisory Board of Advisors, and Pharm Exec.

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