– 2016 biotech revenue growth inches up while net income drops sharply
– US still biggest source of innovation capital but China and UK stepping up
– Research and development investment up, but firms need to use new artificial intelligence (AI) technologies to remain productive and relevant
NEW YORK — Global biotech companies continued to invest in new treatments despite a pull back from capital markets in the US and the EU, lower valuations and increased pressure from payers, according to the 31st annual EY report Beyond borders: staying the course. Still, revenue growth for public biotech companies failed to reach double digits for the first time in two years and net income plummeted by 52%, as the industry continues to be challenged by R&D productivity and the emergence of new business models.
Glen Giovannetti, EY Global Biotechnology Leader, says:
“Despite a marked slowdown in top-line growth driven in large part by aggressive cost containment efforts by payers, the global biotech industry displayed notable resiliency to ongoing reimbursement and regulatory and political uncertainties in 2016. In particular, the ability of early-stage biotechs to attract sizeable amounts of venture capital coupled with a record level of investment in R&D show that the industry is still poised for growth.
“At the same time, the industry continues to shift from a clinical science supported by data to a data-driven science supported by clinicians. And, because of this change, biotech companies need to adopt emerging technologies as well as business model innovations to help ensure their continued success.”
Key results highlighted in the report include:
Pamela Spence, EY Global Life Sciences Leader, says:
“The biotech industry’s financial commitment to R&D, while impressive, needs to be coupled with efficiency improvements to achieve better returns and ultimately to drive greater affordability of its products. With pricing pressures expected to escalate, firms will need to incorporate new digital and artificial intelligence technologies into their traditional drug target selection and overall R&D processes to achieve those returns or risk being outdone by firms that do.
“Furthermore, the payer-driven slowdown in revenue growth industry-wide provides further evidence of the need for companies to accelerate their shift in business models to fee-for-value from fee-for-service. Fundamental to the success of this transformation will be to form data-focused partnerships with the digital technology companies increasingly entering the health care space.”
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About the report
The key findings from Beyond borders: staying the course are based on an EY analysis of companies whose main business purpose is the commercialization of modern biotechnology as applied to health care, with a focus on biotech companies in the US and Europe. EY primary research is based on publicly available information and is supplemented as needed with data published by third-party databases, as well as regional information resources. Specific references are cited in the source notes for each chart.
How EY’s Global Life Sciences Sector can help your business
As populations age and chronic diseases become commonplace, health care will take an ever larger share of GDP. Scientific progress, augmented intelligence and a more empowered patient are driving changes in the delivery of health care to a personalized experience that demands health outcomes as the core metric. This is causing a power shift among traditional stakeholder groups, with new entrants (often not driven by profit) disrupting incumbents. Innovation, productivity and access to patients remain the industry’s biggest challenges. These trends challenge the capital strategy of every link in the life sciences value chain, from R&D and product supply to product launch and patient-centric operating models.
Our Global Life Sciences Sector brings together a worldwide network of 15,000 sector-focused professionals to anticipate trends, identify their implications and help our clients create competitive advantage. We can help you navigate your way forward and achieve sustainable success in the new health-outcomes-driven ecosystem.
For more information, visit ey.com/lifesciences.
Laura Powers
EY Global Media Relations
+1 212 773 6381
laura.powers@ey.com
SOURCE EY