Dispatches from BIO 2016

The state of investment: 'biotech is up'

By Melissa Fassbender

- Last updated on GMT

The state of investment: 'biotech is up'

Related tags Venture capital

The biopharmaceutical industry broke several records in 2015 – but to continue the trend will require a sustained investment from multiple stakeholders.

David Thomas, Senior Director of Industry Research, BIO, explained that while biotech stocks are underperforming – due greatly in part to the political rhetoric surrounding drug pricing – things have in fact, been quite good.

“If you step back and look at where we’ve come over the past five years, biotech is up​,” he said, addressing a full room at BIO International in San Francisco on Monday.

New drug approvals are the highest they have been in a decade, and as Thomas notes, 65% of these approvals have come from small companies, as 90% of the biopharmaceutical industry is made up of emerging companies.

Looking to the future, Thomas expects that the majority of approvals will continue to come from small companies with licensing remaining important (38% of all emerging company clinical programs were partnered in 2015).

This record number of approvals was driven greatly by the FDA pushing breakthrough therapy designations – Thomas said it has been “an all hands on deck effort at the FDA to expedite the approval process​” – but also by the ability to access capital and form alliances.

And the industry broke several funding records last year according to a recent report​ co-authored by Thomas.

Per the report, venture capital raised last year reached $6.9bn, of which the majority was for novel disease companies. “A lot of innovative drugs are getting financing​,” said Thomas. Of the nearly $7bn raised, oncology brought in $2bn and rare disease venture funding hit a high of $1.1bn – twice what it was in 2014.

Additionally, much of this investment is in the preclinical stage, which has traditionally struggled.

The IPO market also grew, although it was down from 2014, which Thomas described as a tough year to beat. “We’re seeing a cooling off in the IPO market​,” he added.

According to the report, Series A Financing also nearly doubled from 2014 to 2015 and for the first time in nine years the amount of investments reached 80. Follow-on public offerings also set a record high with $16.1bn raised.

Ultimately, while “biotech is up​,” as Thomas said, the report explains that to continue this trend will require strong intellectual property protections, a regularity system that is “reflective of current and emerging medical science​,” and proper incentives and values that properly acknowledge the high-risk environment.

For a copy of the complete report, visit www.bio.org​.

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