Growth Drivers

Modern biotechnology is one of the most important key technologies of the 21st century. It ranks among the most attractive of all fast growing industries with an estimated annual growth rate of more than 10% p.a. Sector revenues amounted to USD 137 billion in 2017 and are forecast to around USD 220 billion in 2022.

Increasing life expectancy

Higher life expectancy is one of the greatest achievements of our civilization. The United Nations estimates that the global population will rise by one-third between 2010 and 2050 to a total of 9.1 billion people. The proportion of people over 60 is set to treble from 760 million to 2 billion. On the down side, population aging is associated with an increase in age-related diseases, which puts an immense strain on healthcare systems. There is also a higher demand for treatment of age-related neurodegenerative conditions such as Alzheimer’s disease. Market demand is still not being met by the treatments available today, which means huge unexplored markets are waiting to be tapped.

An unhealthy lifestyle and its consequences

Alongside population aging, another factor driving growth in the biotechnology industry is the global spread of the western lifestyle. In 2008, 1.4 billion people – and rising – were overweight, according to WHO estimates. Pathological overweight (obesity) causes metabolic syndrome, a cluster of conditions including type 2 diabetes, high blood pressure, hardening and narrowing of the arteries, and blood lipid abnormalities.

Friendly regulatory environment

The regulatory and political environment for biotechnology has seen a definite improvement on a global scale. The risk of clinical failures has declined as a result of more effective cooperation with regulatory bodies. In the US, receiving a so-called "priority designation" will shorten the drug review procedure by several months.

The GAIN Act for antibiotics and the Orphan Drug Act for rare diseases are good examples showing that regulatory incentives can have the effect of encouraging progress in certain therapeutic areas. Both pieces of legislation give companies longer market exclusivity and tax breaks, among other incentives. Similar legislation has now been passed in Asia and Europe, too.

Although high drug prices continue to fuel political debate from time to time, it is clear that drug manufacturers need to cover their development costs and that, while new therapeutic approaches may put a strain on healthcare bills in the short term, they help to generate savings in the long term by replacing more expensive therapies.

The continuing importance attached to innovation in the US is also evident in the new PDUFA guidelines, PDUFA VI. The new law ensures the consistent funding of the FDA during fiscal years 2018–2022, enabling the agency to continue to bring important new medicines to the market. This regulatory environment is one reason why more than half of all new drugs now originate in biotech labs.

In 2018 alone, 59 new products were approved in the US, more than in any of the previous 20 years. Of these, 30 products were developed by biotech companies, 19 by large pharmaceutical companies and 10 by speciality pharmaceuticals and generics companies. The EU CHMP recommendations for approval totaled 42 new active substances in 2018, with 17 stemming from biotech companies and 25 from the large and speciality pharmaceutical industry

Technological progress

BB Biotech believes that 2019 will continue to bring important technology progress allowing new drug modalities to address many unmet medical needs in future years. Thus, the Management Team’s asset allocation will not only center around established areas – such as oncology, orphan diseases and neurological indications – but will also focus on rapidly emerging technologies which can offer novel drug modalities which promise the best therapeutic profile and economic value. For example, BB Biotech believes that RNA-based medicines – currently in early adoption for rare and serious diseases – will broaden into larger patient populations in the coming years. On the other hand, one-time potentially curative genetic medicines are likely to be applied for the foreseeable future to rare, monogenetic diseases. As it has already done successfully in the past, BB Biotech will continue to add companies performing early-stage clinical development in these areas. With this strategy, BB Biotech’s current focus on small molecules and biologics will evolve over time to include newer drug modalities based on technologies its portfolio managers expect to provide high-value medical solutions to seriously sick patients over the coming decade.