Currently, the pharma industry is going through a serious crisis, as the sector needs to review its economic model. On the other hand, the biotech sector often considered as the best way to innovate seems less promising than expected when it comes to putting drugs up on the market. Knowing this, it is likely that the biotech industry will face same the challenges than those of the pharma industry.
First of all, with a low R&D productivity and the loss of patents, the Pharma industry needs to maximize the profitability of product portfolios. One way of doing so is through more and more partnerships, and more specifically with biotech companies.
For 30 years now, the biotech sector has been bringing a lot of innovations to the industrial process as well as to the final products. This has been made possible due to the discovery of new action mechanisms, a better knowledge and understanding of diseases, and a lust to improve the existing techniques.
Bio-blockbusters: a new model for the red biotech industry
Can we still say “blockbuster”? The term is affiliated to the pharma industry. Nowadays, there is still a large part of new chemical entities (NCEs) available on the market brought by the pharma industry.
Today, we should use the term “bio-blockbuster” to represent this new model designed by the biotech and biopharmaceutical companies. Indeed, more and more new biological entities (NBEs) have been launched on the market since 2000. For instance, in 2011, on the most 20 sold drugs, 8 were from the biotech industry, representing almost 50% of the approvals given by the regulatory affairs. These drugs are focused on niche markets, such as rare diseases. Bio-blockbusters are becoming a new model for both industries.
Is the biotech industry efficient enough to launch innovative new drugs on the market?
From January 2006 to December 2007, there were only 103 products from the biotech and pharma industry approved by the FDA. These include:
- 47 drugs from biotech companies (9 were considered as innovative),
- 16 drugs from a collaboration between biotech and pharma,
- 40 from the pharma industry.
If we just take these figures, the biotech industry seems to show good results. But now, let’s take a look at the number of failures in phase III:
- 68 drugs from biotech companies,
- 18 drugs from a collaboration between biotech and pharma,
- 5 from the pharma industry.
That’a total failure rate of 59% for biotech companies, 52% for alliances and 11% for pharma companies. It shows that the pharma industry has a greater expertise to put drugs on the market, but also that the biotech industry is not efficient enough in this exercise.
The rise of biosimilars.
Besides, we know that one bio-blockbuster is sufficient to make a company profitable. However, because of the loss of patents in the biotech industry, one can observe a new fact, namely, the appearance of biosimilars. We already address the topic in our review “Will 2015 be the year of biosimilars?”. Today, there is a competition for biosimilars between biotech companies. The same analogy can be made with the generics and pharma industry. Ultimately, we can observe a more complex competition:
- Bio-blockbusters VS Blockbusters
- Bio-blockbusters VS Biosimilars
- Biosimilars VS Blockbusters
The first ever biosimilar launched was Remicade, and now, biosimilars MabThera and Herceptin should soon appear in the next 5 years.
Adopting a M&A strategy to stay competitive and innovative can save both industries
Pharmaceutical companies are not blind to the necessity of being innovative. These firms want to renew their pipeline and need to understand the potential behind biotech companies to achieve innovativeness. This strategy also helps biotech companies to develop new technologies because of the financial resources pharmaceutical companies bring.
According to a study led by the audit firm Ernst & Young, the total value of M&A involving American or European biotech companies in 2013 reached €42.5Bn. Moreover, the same year, biotech-biotech collaborations increased by 68% to reach €9.47Bn.
A new model of value chain in biotech
Finally, the biotech industry is confronted to certain difficulties, when trying to carry on launching products on the market. Indeed, much like the pharma industry, the biotech industry faces 4 particular issues:
- Low R&D productivity if we look at the number of failures in clinical trials,
- High R&D costs (huge when it fails in clinical trial!)
- Loss of patents, triggering the apparition of biosimilars,
- Need to implement Merger & Acquisition to consolidate the pipeline.
Regarding today’s context, some biotech companies want to master the pharmaceutical value chain to increase the probability of success of their product development. Because of a financial weakness and an economic model which is changing, some biotech companies have decided to adopt a new model called “Fully Integrated Pharma Companies” or FIPCO. One way to achieve this FIPCO model is via a M&A strategy to help biotech companies be perennial with a long-term vision. Today, on 4000 biotech companies, there are only around 60 having adopted it. For instance, we can quote: Amgen, Celgene, Gilead, Shire. Can we expect a boom of this model in the near future?
Sources :
(1) Sandner P, Ziegelbauer K (2008) Drug Discov Today 13, 457-63
(2) Ernst & Young (2014) Beyond borders Biotechnology Industry Report
(3) HBM Partners (2013) Trends in US New Drug Approvals, www.hbmpartners.com/report
(4) Amir-Aslani A et al. (2013) Spectra Biologie 199, 24-5
(5) Czerepak E, Ryser S (2008) Nat Rev Drug Discov 7, 197-8
(6) Buisson R et al. (2014) Biofutur 350, 36-40