Improved Biotech Growth could also Encourage Further M&A Deals
A report indicating an expected £7.8 billion in revenue during 2013/2014 for the UK biotechnology industry could also signal the continued growth of pharmaceutical M&A deals.
According to the IBIS World report, the biotechnology industry in the UK will experience an increase of 2.1% in revenue for 2013/2014. This means that this UK industry has grown by a compound rate of 3.9% since 2009, which will last until 2014. Further expansion in this industry is expected as the current economy recovers and private capital resources grow.
Industry analyst at IBIS World Robert Scotton explains the reasoning behind these projections as he says, “Britain's ageing, ailing population wants advanced treatment options to ward off the natural decline of the body and the Biotechnology industry has managed to draw in persistently high levels of private investment to investigate this area. Government programmes to support the industry and encourage private sector investment are expected to provide further help.”
This report suggests that it is this ageing population and increasing health decline that will further the demand for biopharmaceuticals, reduce resistance towards new treatments and bring more capital to the industry.
This development could have positive consequences for the biotechnology firms as well as larger pharmaceutical manufacturers. Since the beginning of this year, larger pharmaceutical companies have sought to create deals with smaller, speciality and generic drug manufacturers in order to gain access to new drugs. An article by Thomson Reuters demonstrated that the volume of healthcare M&A rose to $93.6 billion in the first six months of this year. This was an increase of 30.2% as compared to the volume during the same period last year.
For instance, pharmaceutical companies have looked for potential acquisitions with biotech firms who specialise in oncology. Cancer drugs often have a higher demand and price and are a welcome source of revenue for Big Pharma who has experienced several losses from patent expirations. Bayer improved its cancer drug pipeline with $520 million antibody deal with biotechnology firm Seattle Genetics. This German pharmaceutical company has also previously partnered with biopharmaceutical company Onyx Pharmaceuticals for their cancer drug Nexavar.
Onyx has recently created a new blood cancer treatment Kryprolis, which was approved in the US last year but still has to be launched on a global scale. This drug has already had sales of $64 million in the quarter ending March 31 and analysts have estimated annual sales of nearly $2 billion by 2018. Onyx have not yet partnered with any pharmaceutical company to distribute this treatment to patients, which could be a future revenue source for the major pharmaceutical players.