Published this month, analysts from EY assess the industry in Beyond Borders: EY biotechnology report 2022.
Biotechs currently account for a record 65% of the approximate 6,000 clinical asset candidates in active development, including 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.
Meanwhile, COVID-19 vaccines and therapeutics are by no means a thing of the past: with spending on such products expected to more than double by 2026.
COVID-19 spurs innovation and revenues
Biotech performed ‘exceptionally well’ in 2021, driven by the COVID-19 crisis. That’s against a backdrop where the pandemic is projected to result in a cumulative reduction in global medicine spending of $175bn over the next seven years compared with the pre-pandemic outlook.
“The vaccines and antivirals biotech has innovated to address COVID-19 have delivered a significant top-line surge, with biotech revenues hitting $216.7bn in 2021 — a dramatic 35% annual increase on 2020,” note analysts.
“Traditionally, the vast majority of biotech revenues are generated by the industry’s commercial leaders (defined here as the companies that generate more than $500m in annual revenue). Indeed, in 2021, the 46 commercial leaders generated 86% of the industry’s total revenues. However, within this leading group, an astonishing 22% of all revenues were generated solely by the two companies that pioneered mRNA-based vaccines against COVID-19: BioNTech and Moderna, which collectively generated over $40bn in 2021 revenues.
“BioNTech and Moderna only joined the ranks of the commercial leaders in 2020, yet they are generating revenues greater than any other biotech in the world, barring long-standing industry leaders Amgen and Gilead. This dramatic rise underscores the extent to which the COVID-19 market dominated the biotech story in 2021. Moreover, this explosive growth is not going to disappear overnight — on the contrary, projections indicate that spending on vaccines and therapeutics targeting the coronavirus will more than double by 2026.”
While vaccines will continue to dominate this space, drugs will take a growing share of the market:
Regeneron’s REGEN-COV treatment, for example, brought the company 89% revenue growth in 2021, while Gilead recorded 11% growth on the strength of its Veklury (remdesivir) product. Both featured among the top biotech revenue growth stories of 2021, as did Vir Biotechnology, a new entrant in the commercial leader group in 2021. Vir’s Xevudy (sotrovimab) monoclonal antibody (mAb) treatment for COVID-19 reached $1.1bn in revenues on the strength of its profit-sharing arrangement with its partner, GlaxoSmithKline.
Gene and cell therapies
“Since the onset of the pandemic, biotech has experienced significant growth with the advent of the mRNA vaccines, antivirals, virtualization of clinical trials and more.
"In parallel, the large cap biopharma industry is facing a foundational growth gap due to upcoming patent expirations for its leading blockbusters biologics and pipelines, which are not sufficient to sustain their top-line growth aspirations.
"With the pandemic boom in the rear-view mirror, flush balance sheets and a huge correction in deal target development stage biotechs, now is an opportune time for big pharma to deploy its firepower to acquire biotech innovation.”
- Arda Ural, PhD, EY Americas Industry Markets Leader, Health Sciences & Wellness
While COVID-19 dominated biotech innovation and revenues in 2021, the wider industry enjoyed increased activity as well.
Excluding emergency use authorizations for COVID-19 products, 2021’s new product approval count still exceeded 2020’s (in 2021, 63 new products were approved: 50 new molecular entities and 13 biologics license applications).
“These approvals should be only the start of a wave of new innovations reaching the market. Biotech pipelines are full: Over 6,000 drugs are 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.
“Moreover, the big pharma leaders need access to these biotech innovations, with loss of exclusivity threatening to erode an estimated $252bn from industry revenues by 2026.
“Replacing these revenues will depend heavily on biotech pipelines, particularly on the development of new modalities.
"These new modalities include the mRNA platforms that achieved significant commercial success in 2021, as well as next-generation antibodies and cell and gene therapies.
“Further into the future, these innovations will synergize with other novel technologies, including next-generation neural nets with OMICs sequencing tools, bioinformatics and AI-powered analytics.”
Other key findings of the report include:
- IPO bubble bursts: Biotech IPOs reached record levels in 2021 – 143 offerings totaling $19.3bn – but the IPO and follow-on windows have shut, and biotech access to capital markets via IPOs or SPACs looks increasingly difficult.
- VC money follows science: Venture financing reached a record $26.2bn in 2021, and activity remains strong in 2022 as investors continue to bet on biotech’s long-term viability.
- Pausing M&A market: Deal-making value decreased by 46% when compared to last year and remains slow thus far by mid-2022. With historic drops in target valuations, big pharma players may seize the opportunity for large-scale M&A later this year. In the interim, big pharma continues to favor strategic alliances, committing to a potential infusion of $314bn in 2020 and 2021 alone. Even if the US were to experience a macro-economic slowdown, our research shows that biopharma M&A has been driven by industry’s unique fundamental needs to drive growth.
- Operational challenges: In the wake of COVID-19, biotechs face significant operational challenges, including addressing the shortfall of talent across the sector and anticipating policymaker-driven shifts in supply chain expectations, pricing and scaling commercial infrastructure.