The pharmaceutical industry is constantly changing, but over the past 2 years this change has happened apace. The landscape of the industry is transforming in the face of significant challenges, and there are several factors that contribute to this change.
The significant contribution of the biotechnology sector to innovative drugs is unquestionable. Here, it is at the equity level that the greatest changes have occurred. Biotechs have found it increasingly difficult to float on the stock exchanges, so IPOs have declined around the world. As usual, there are exceptions, but they are just that – exceptions. Another factor is that the larger pharmas are acquiring biotechs and, importantly, not just any old biotech is being acquired. Those that have strategic value as well as promising pipelines are being targeted. Does that mean that we will not see the emergence of of new larger independent companies in the future?
“The pharmaceutical industry is constantly changing, but over the past 2 years this change has happened apace. … Biotechs have found it increasingly difficult to float … so IPOs have declined … larger pharmas are acquiring biotechs and have upped their other deal making activities with biotechs too. Other challenges include attaining regulatory approval and pricing and reimbursement … These have all led to deep cost cutting, staff lay-off … reduction of fixed costs and increased outsourcing solutions, including seeking partners for risk sharing.”
The larger pharmas have also been changing in other ways over the past 2 years. As well as acquiring a number of biotechs, they have upped their other deal making activities with biotechs too. Furthermore, they are more confident of out-licensing their early-stage development projects to biotechs, with rights to bring back successful products at a later stage.
One of the greatest challenges, for both pharmas and biotechs, is attaining regulatory approval. This is probably the biggest hurdle facing the pharmaceutical industry. What is more, pricing and reimbursement continue to be threats to the industry. These challenges have led to deep cost cutting, and the industry has probably seen the largest lay-off of staff for some time. This has meant that pharmaceutical companies are, increasingly, reducing their fixed costs and moving to an even higher number of outsourcing solutions, including seeking partners for risk sharing.
These are tough times for the pharmaceutical and biotechnology industry, and the activities outlined above are a reflection of the need for the industry to overcome the challenges concerned. What shape will the industry be in in another 2 years’ time? It is difficult to predict precisely, but one thing is for sure, it will not be identical to the one we see today.
Fintan Walton Chief Executive Officer PharmaVentures Ltd