Sector in Numbers
Biotechnology has displayed outstanding growth in recent years and moved back into the sights of investors in equally stunning fashion. Biotech stocks have definitely shed their former niche status following the collapse of the dot-com bubble at the turn of the century. Biotech has matured into a major industry with billions in sales. Numerous biotech companies have entered the profit zone and are selling one or more products in the marketplace. Biotech companies reported aggregate sales of about 120 billion dollars in 2015, more than double the amount of sector sales reported in 2010. And the trend is still pointing up.
A total of 45 new drugs were approved by the FDA in 2015, which is more than in any one year since 1996, when an all-time high of 53 new drugs were approved. Lately every second drug approved by regulators has emerged from the lab of a biotech company. Market research firm IMS Health estimates that 30 to 40 new biotech drugs will be approved every year in the USA and Europe going forward to 2018. Thanks to these sales revenues and collaborative research agreements, an increasing number of biotech companies are now generating profits.
Among the various segments of the healthcare industry, the biotech sector is well positioned to sustain its dynamic growth during the years ahead thanks to its power of innovation. The biotech sector's growing upside potential is also being fueled by its research priorities, which are primarily focused on diseases for which no adequate treatment is currently available. These are illnesses that either become more prevalent with age, such as cancer, arthritis or neurodegenerative disorders such as Alzheimer’s or Parkinson’s, or for which treatment is currently non-existent or ineffective, such as hepatitis, multiple sclerosis, or genetic and rare diseases. Peak sales potential of new drugs that effectively treat such diseases is often in the billions.
Growth rates 2014 to 2017E
Source: PHARMA: Bloomberg Intelligence (BRLPHACV Index); BIOTECH: NBI + ex US Biotech from Bloomberg; MEDTECH: MSCI World Healthcare Equipment and Supplies (MXWOOHEI Index), December 2015.
The sometimes high cost of drug treatments has led to a fundamental debate on drug pricing. On the other hand, new treatment options can produce tangible savings for healthcare insurers and government healthcare systems. And annual spending on prescription drugs is still well below the costs of treating patients in hospital settings.