PRINT THIS PAGE Biotech: a shift towards predictive, preventative and personalised medicine
16/11/2005. Source:Burrill & Company.
Transitioning from a society that is struggling to meet the escalating health problems of an aging population to one that focuses on wellness by preventing or delaying the onset of disease is a paradigm shift that is occurring before our very eyes, says G. Steven Burrill, CEO of Burrill & Company. That is the overall conclusion from Burrill's 19th annual report on the state of the biotechnology industry. The 625-page publication reflects the tremendous growth that is taking place worldwide in this fascinating, sometimes perplexing, but never dull sector.
"Chronic care now accounts for almost 80% of the nation's health care cost," said Burrill, "but, with continuing progress in systems biology, we are moving closer to a personalized medicine world bringing renewed hope for a future in which an individual's genetic makeup can be determined and used to help tailor safer, more effective, cost-efficient treatments."
How this will be accomplished is one of the major themes of Biotech 2005. The report keys on the fact that biotechnology is fueling a major transformation in the healthcare paradigm -- one that emphasizes earlier disease detection, more targeted treatments, and adjunctive support through enhanced nutrition. Thanks to advances in genomics, proteomics and "systems biology," we are getting closer to understanding the underlying mechanisms of a number of diseases. This progress coupled with a growing capacity to better capture, integrate and utilize medical information, is facilitating a move toward predictability - from drug discovery to the development of accurate molecular diagnostics and targeted treatments - and on to prevention.
"The focus on a one-size fits-all blockbuster drug is a strategy that may have run its course," said Burrill. "The successful pharmaceutical companies of the future will be those that marry both molecular diagnostics with targeted drug discovery and deliver effective personalized therapies."
Further driving biotech's growth is big pharma's need to boost dwindling drug pipelines. "Given the fact that in 2004 biotech companies enjoyed the best track record for approvals since 1999, it doesn't require a rocket scientist to understand where pharma must look to help close its innovation gap," stated Burrill.
"While the biotech industry has not escaped the fallout from drug safety issues, disappointing trial results from biotech-derived medicines and the general investor malaise in a year that was decidedly unsettling, the U.S. biotech industry nonetheless managed to raise more than $20 billion in debt and equity capital and broke all previous records for cash generated through partnering $10.9 billion, debt transactions $8.4 billion and venture capital investment $3.7 billion. The industry exited 2004 with a market cap of $400 billion, up 14.5% over 2003, but still down from the nearly $500 billion during the market hyperactivity surrounding genomics in 2000."
New biotechnologies impacting other sectors
While biotechnology and its impact on healthcare tend to dominate the headlines, Biotech 2005 describes in detail how these technologies are being applied with equal effect in the industrial and agricultural sectors. The report examines biotech's impact on agriculture and animal health, nutraceuticals, diagnostics, and industrial biotechnology (biomaterials and bioprocesses). For example, continuing scientific and commercial acceptance of GMOs, interest in transgenics, progress in understanding the genomes of companion and domestic animals, and support for animal cloning all contributed to a very encouraging 2004 ... as did appreciation for biotech's potential to ameliorate world hunger.
Biotechnology becoming truly Global
Biotech 2005 describes that biotechnology is no longer limited to the industrialized nations -- it is now truly global. There has been significant progress in recent years in the advancement of biotech in Brazil, Russia, India, China, (BRIC) and other nations who are implementing biotech to provide more appropriate and affordable solutions to their healthcare and agricultural problems.
Biotech 2005 reports that performance on the international stage was mixed in 2004. Europe enjoyed a stellar year, while the Canadian biotech industry struggled with its fund raising. The Pacific Rim countries continue to invest heavily in biotech and we are seeing growth in the number of biotech international collaborations in that part of the world.
While VCs are remaining cautious about the opportunities that are arising in these new regions, expect to see foreign biotech investments increase as the worldwide marketplace becomes stronger and more stable.
The future industry trends Biotech 2005 identifies are:
- Safety issues in the pharmaceutical industry will continue to dominate the headlines. With public confidence at an all time low, we will see several big pharma combinations in response. Deals will be driven by the need to restore public confidence and to improve the bottom line In addition, pharma has demonstrated that it is comfortable with acquiring biotech companies as well as partnering with them and so we expect to see more acquisitions in 2005.
- The emphasis on "blockbusterology" will continue to decrease as we see the migration to more niche products driven by pharmacogenomics and molecular diagnostics that can help to identify the right patients for the right treatments.
- Buyers with strong economic incentives be they managed care companies or the government, have a real interest in prevention. There is evidence that even Medicare is reaching out to pay for prevention as a vehicle to manage costs. We're going to see a lot more than just rhetoric around preventative medicine with dramatically increased value for the diagnostics as a result.
- The Nutraceuticals sector will continue to demonstrate robust gains. Rising concerns about obesity that emerged as a major driver in 2004 will continue to have an impact. Consumers worried about the safety of their prescription drugs, will also be a factor as people exercise control over the pills they "pop" and turn to more natural, alternate remedies for their ills, and more importantly, spend for prevention.
- The year will remain challenging for the small and mid-sized biotech companies and we are likely to see this group of companies looking to enter into more M&A's as a preferred option than trying to trim burn rates in the hope of riding out the challenging economic conditions.
- The biotechnology industry will continue its heated opposition as regulatory bodies move towards establishing approval pathways for biogenerics. The timetable for guidelines that was once seen as several years away from implementation, is being contracted. The potential cost savings of lower cost biologics is driving the regulatory and reimbursement agenda. In an era of skyrocketing healthcare costs, biogenerics would appear to offer an attractive option for governments and healthcare payers.
- Although events caught up with the sector in Q1 05, where nearly all the hard-won gains in 2004 were erased, and the IPO window closed, biotech will have another strong year in 2005. The pendulum will swing away from IPOs more to M&As and partnering. In the last two years these activities have generated over $20 billion for the biotech industry, compared to $2.2 billion generated through IPOs in the same period. Deal making will be driven by pharma's appetite for what biotech has to offer.
- On the venture capital front, 2005 will be an even bigger year than 2004, as venture capitalists continue to plow more money into the biotech sector.
- Products under the regulatory microscope in 2005 may have a tougher time receiving approval. With consumers, regulators and the industry watching the FDA's every move the bar has been raised on drug submissions and oversight.
Founded in 1994, Burrill & Company is a 50-person San Francisco-based global leader in Life Sciences Venture Capital, Life Sciences Merchant Banking and Life Sciences Media. The Burrill family of venture capital funds, with over $500 million under management, includes the Burrill Life Sciences Capital Fund, the Burrill Biotechnology Capital Fund, the Burrill Agbio Capital Fund and its successor - the Burrill Agbio Capital Fund II, and the Burrill Nutraceuticals Capital Fund. For more information, please visit Burrill & Company's website at www.burrillandco.com.
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