With a dynamic market, challenges both ongoing and unprecedented, and fascinating technological advancements at play, it is perhaps an understatement to remark the biotechnology field is at an interesting time. To get a better idea of the factors influencing the industry and how these forces might shape the industry in months to come, EY offers its Beyond Borders report, a look at the current state of biotech as well as its possible future.
Outsourcing-Pharma recently connected with two experts from EY to learn about the report and what it reveals about biotech:
- Arda Ural, EY Americas industry markets leader for health sciences and wellness
- Ashwin Singhania, principal with EY-Parthenon, strategy – life sciences
OSP: Could you please share some of the reasons why EY decided to tackle the topics and challenges with this survey?
AU: The 32nd edition of EY’s Beyond Borders provides a snapshot of the US and European biotechnology industry’s impressive performance on innovation during an unprecedented period of global disruption.
When we last published our Beyond borders analysis five years ago, we noted the growing geopolitical complexities set to impact biotech. Titling our 2017 report, “Staying the course,” we observed that the industry would have to navigate a business environment in which, increasingly, “uncertainty is the only certainty.”
From the perspective of 2022, we can affirm that biotech has indeed successfully stayed the course and kept innovating despite the upheavals that have affected global business since the last edition of this report. In fact, biotech revenues hit a record-shattering $216.7b in 2021 — a dramatic 35% annual increase from 2020.
As we enter a post-pandemic world, EY is closely monitoring biotech’s promising outlook for revenues, the unprecedented investments made in the innovation renaissance in R&D, and where firepower may be deployed in the industry.
OSP: Please share some of the questions you were hoping to answer when you were putting this together.
AS: While there were many factors for us to consider when assembling the report, some of the questions EY was most concerned with analyzing include:
- What was driving record-shattering biotech revenues?
- What was the deal landscape?
- How are biotechs evolving in their journey of maturity?
- How do biotechs contribute to the broader innovation alliance ecosystem formation?
- How was this a contribution a reflection or impact of the pandemic?
- What is the outlook for the next 12 months’ biotech performance?
- What challenges do biotech C-suites face ahead?
OSP: This quote pops out: “Biotech performed especially well in 2021, not in spite of but because of the COVID-19 crisis.” Could you please elaborate on that?
AU: The COVID-19 crisis put biotechs on center stage – and they delivered. Biotechs were a big contributor to the production of vaccines and other therapeutics needed to help us respond to the pandemic at an unprecedented speed. Biotechs closely collaborated with the FDA and CDC to get vaccines and therapeutics to market as soon as possible.
In fact, the industry had over 60 new molecular entities (NMEs) approved by the FDA in both 2020 and 2021, up from an annual total of 29 a decade ago. Biotechs currently in active development include more than 2,000 cell and gene therapies that are projected to play an increasingly important role in driving revenue growth in the next decade.
OSP: Please talk about the growth we’ve seen in COVID treatments/vaccines and how the report projects spending to expand in the coming years.
AS: While the pace at which vaccines and treatments reached the market during the pandemic will not necessarily persist in a post-COVID world, the past few years have shifted the focus of biotechs and biopharmas to new therapeutic areas and capabilities of mRNA platforms and antivirals.
EY’s Beyond Borders report found that biotech’s pipelines are full. There are over 6,000 drugs in active development, with emerging biotechs accounting for a record 65% of them. This total includes around 800 next-generation biotherapeutics, with notable R&D activity in CAR-T and NK cell therapies, gene editing, and RNA therapeutics.
Emerging biotechs are responsible for a record 65% of the overall R&D pipeline. Projections indicate that spending on vaccines and therapeutics targeting COVID-19 is expected to increase from $100b in 2021 to $309b in 2026.
OSP: What do the numbers and the individual respondents have to say about the role of new and emerging technologies in biotech growth/evolution?
AS: Over the two-year period from 2020 to 2021, nearly $314b of biobucks became available to emerging biotechs. With historical alliance ROIs being 33% higher than M&A returns — according to EY research — alliances are likely to continue as a major focus for industry dealmaking.
Though industry valuations are currently experiencing a correction, which is most pronounced for the early-stage companies, its fundamentals remain strong, with biotech innovation projected to remain a major driver of pharma revenues in the coming years. Large pharma balance sheets have never been stronger with record firepower to fund M&A, collaborations, and partnerships critical to achieving their growth targets, particularly as they head into a massive loss-of-exclusivity gap primarily due to biosimilar penetration.
OSP: Then, what does the report tell us about supply-chain resilience, and industry leaders’ moves to build in resilience for the future?
AU: Biotech and biopharma supply chains have shown just how disruptive the past few years have been. There has been immense progress in supply chain resiliency – less than 1.5% of more than 20,000 FDA-registered drugs were unavailable during 2020 and 2021. However, many issues have not yet been resolved for the long term.
Given the pandemic and the recent geopolitical conflict between Russia and Ukraine, biotech C-suites understand the importance of diversified production and domestic resiliency. However, more than 80% of APIs still originate from China. While stockpiling essential medications and APIs offers a Band-Aid solution, it does not address the longer, foundational challenges facing the biopharma industry. In parallel, we are seeing that the political pressure in both the US and EU will continue to ensure resiliency for supply chains.
C-suite leaders must consider how to near-shore the supply chain network and manufacture products domestically to prepare for any future geopolitical and/or natural disaster-related disruptions. That said, while moving a manufacturing footprint to the US and adding robotics capabilities seems the most logical, it is very capital and time-intensive. Each manufacturer has to build its own decision based on risk and reward.
OSP: What other areas of the report would you like to highlight?
AS: As with other industries, ESG has become top-of-mind for biotech executives. CEOs are embracing the ESG agenda because they recognize that these values increasingly shape how companies are perceived in the marketplace, including potential partners and investors, and consumers. two topics specific to life sciences that have emerged are ensuring diversity in clinical trials as well as expanding access to medications.
We are seeing some movement in the biotech and broader health care industries to prioritize diversity, equity, and inclusion and center their strategies and initiatives around communities. Nearly three-quarters of U.S. clinical trials under-enroll Black patients, and almost half under-enroll Hispanic and Latino, as well as Asian patients. Companies should be implementing strategies before, during, and after clinical trials to help address this issue.
In parallel, we are seeing companies working to ensure that their products are getting to those patients who need them the most. This includes. making products physically and financially accessible to all relevant communities and populations by ensuring they have a strategy to create societal value, identifying populations with the highest need, and monitoring metrics to measure progress towards a company’s vision for patient access.
OSP: Do you have anything to add?
AU: The lifeblood of the industry is innovation in approaches to treat or cure diseases with unmet needs. There was over $300b of capital raised in the U.S. alone over 2020 and 2021, and we see this in the strength of the industry pipeline.
There is also over $1t in deployable firepower for M&A and licensing to help bring these innovative therapies to market. We foresee that M&A will pick up, but to get there, biotech CEOs need to prioritize their pipelines to maximize long-term value creation, consider how to preserve and extend their cash runways to hit their next value inflection events, and ensure that they are retaining talent to be able to hit program milestones efficiently.