Biotechnology is the use of living systems and organisms to develop or make products, or any technological application that uses biological systems, living organisms, or derivatives thereof, to make or modify products or processes for specific use. Depending on the tools and applications, it often overlaps with the related fields of bioengineering, biomedical engineering, biomanufacturing, molecular engineering, etc.
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. 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:
- Revenue growth slows, net income and financing decline: Revenue for US- and Europe-based biotech companies totalled US$139.4b in 2016, up just 7% from the prior year. Net income dropped 52% year-over-year to US$7.9b, while financing dropped 27% to US$51.1b in 2016 – the first decline in four years, yet still the third highest industry total.
- Early-stage venture capital remains plentiful: Investment in seed and Series A biotech venture rounds totalled US$3.6b in 2016, a record 36% of the total US$10b of venture capital raised, and higher than the previous 15-year averages of US$1.3b.
- Capital flows emerge from the East, while innovation capital goes global: As many traditional forms of capital became more difficult to access in 2016, biotechs are considering Asia, particularly China, as a potential source of capital. These companies are also exploring additional sources of innovation capital – cash raised by biotechs with revenues of less than $500m. While US biotechs raised 81% of the US$26.3b total innovation capital in the US and Europe, the UK and China each raised more than US$1b in innovation capital.
- M&A activity strong, but guaranteed money drops: Seventy-nine deals in 2016 totalled US$94.4b, a decline from 2015’s record year but still the second-highest total ever for both value and volume. Meanwhile, guaranteed money in alliances dropped sharply, with 17% of all M&A value being tied up in milestones that may not materialize. Still, this was higher than the previous year’s 12% of deals with these earn-out payments.
- R&D spending up, industry market cap and valuations decline: R&D spending, a key indicator of the future health of the sector, hit a record high of US$45.7b in 2016 – a 12% jump from the prior year. However, the industry’s cumulative market capitalization slipped under US$1t for the first time in three years to US$863b – a 17% decline. In the US alone, 29 companies each lost more than US$1b in market capitalization.
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.”
Antibiotics kill good and bad microbes. A lot of people just go to their doctor and say I can’t miss work, I can’t miss school — may I have an antibiotic? Not realizing antibiotics are very risky, they hand them out like M&Ms in a candy jar. We just want doctors to be really mindful when they prescribe.
Just like a human being, a house or office has its own microbiome, with good and bad microorganisms. It’s high time to customize our spaces with the right microbes. The quest to sterilize our hospitals has created dysbiosis in the microbiomes of our buildings. By removing harmless bacteria that would otherwise impede the growth of pathogens, we have inadvertently constructed a more dangerous ecosystem.
Rather than trying to exclude microbes from our buildings and public spaces, it is high time to lay the welcome mat out for them. One of many microbial ideas: to deliberately seed buildings with bacteria. The microbes won’t be sprayed or plastered onto walls. Instead, they’ll come caged within tiny plastic spheres.
These bacteria should then jump over to anyone who interacts with the spheres. These spheres are effectively a different take on probiotics — a way of delivering beneficial microbes not through yogurt drinks or nutritional supplements, but via an animal’s surroundings. Lacing walls with microbial spheres, Baccy Balls, makes perfect sense.
Now is a time for thinking big. It’s a time when families can be persuaded to swab their houses for researchers, when aquarium managers are as concerned about the invisible life in their waters as they are about the charismatic dolphins, when hospitals are seriously considering adding microbes to walls rather than removing them. It’s the start of a new era, when people are finally ready to embrace the microbial world.