Big Biotech has outpaced Big Pharma in terms of growth of sales, income, investment in R&D and market cap during the past three years. As the industry moves away from the time of the one-size-fits-all blockbuster, the biotechnology industry’s strength at developing innovative therapies that meet unmet medical needs and target the molecular mechanisms of diseases gives it an advantage in creating value.
But as pricing pressures become an increasingly challenging prospect for the companies like pharmaceutical and biotechnology, they will need to find new ways to build relationships with payers, providers and patients to capture value outside of their products.
Big Biotech experienced a 57% increase in market cap for the three years ended December 31, 2012. As the total value of the group reached $260.6 billion from $160.1 billion at the end of 2009. That compared to a 17.4% increase for Big Pharma during the same period as the market cap for the group climbed to a collective $1,257 billion from $1,070 billion.
The big jump in the value of Big Biotech companies is not just a matter of investor speculation – these companies have had significant clinical and market successes that have driven their value higher.
Net income for Big Biotech jumped 23.3% during the three-year period, to $11.0 billion from $8.9 billion. That compared to an increase of just 1.1% for Big Pharma, as its net income rose to $96.4 billion from $95.4 billion.
Revenue growth for Big Biotech grew 40.6% to $48.6 billion at the end of 2012, from $34.3 billion three years before, compared to an increase of 17% for Big Pharma, whoses revenue rose to $526.8 billion from $450.1 billion during the same period.
The growth in revenue for Big Biotech has been reinvested into increased R&D spending, which has grown 38.8% to $10.3 billion, or more than triple the 11.7% increase in R&D spending by Big Pharma during the period. The latter group’s spending reached $76.3 billion at the end of 2012, up from $68.3 billion.
Biotech’s products will dominate the list of top-selling drugs for Big Pharma and be the most prized assets in their pipelines.