Biologics Sector Expected to Drive Deal Activity in the Biopharma Industry Through the Balance of 2009, Finds New PricewaterhouseCoopers Report
New York, May 28, 2009 - Dried up credit, an anaemic IPO market and a reluctant investor pool have taken their toll on the biotech industry. And, a 60 percent drop in the NASDAQ Biotech Index from March 2008 to March 2009 has spurred a drop in the valuations of private biotech companies. These factors will likely result in an uptick in biotech M&A and alliance activity in 2009, with a number of specific therapeutic and diagnostics segments driving the activity, according to a new report from PricewaterhouseCoopers LLP (PwC) entitled "Biotech: Lifting Big Pharma's Prospects with Biologics."
With double-digit growth expected over the next decade, the biologics sector's appeal lies not only in their pipeline-filling capability, but also in the perceived difficulty for generic drug makers to replicate the original branded biologic, thus potentially extending the revenue stream, even after the biologic goes off patent. Biotech startups are seen as important incubators of new drug development not only for traditional pharmaceutical companies but increasingly for large biopharmaceuticals as well. Venture capitalists have recognized these opportunities by investing $2.7 billion into 245 human biotech deals in 2008, according to the MoneyTreeTM Report from PwC and the National Venture Capital Association based on data provided by Thomson Reuters.
Therapeutic and diagnostic biologics helped drive venture capital (VC) investment in the overall human biotech sector in 2008 and are the fastest growing subsectors. Investments in therapeutic monoclonal antibodies rose 34 percent in 2008 to $640 million in 46 deals, up from $477 million in 41 deals in 2007. The immune response effectors subsector also saw a jump in investments, capturing $494 million in 31 deals in 2008, up 90 percent from the $260 million invested in 17 deals in 2007. Additionally, four of the top 10 human biotech deals in 2008 were companies focusing on therapeutic monoclonal antibodies.
"In late 2008 and early 2009, we saw biotech stocks outperform the S&P 500 and the NASDAQ Composite for the first time in years," said Tracy Lefteroff, global managing partner of the venture capital practice at PricewaterhouseCoopers. "This show of investor confidence is a harbinger for an increase in M&A and alliance activity in the sector. Biotech startups will be attractive acquisition targets for larger pharmaceutical companies interested in diversifying their portfolios. We expect to see a significant increase in this sort of activity before the end of 2009."
A full copy of the report is available for download at www.pwc.com/pharma.
About PricewaterhouseCoopers Pharmaceutical and Life Sciences Industry Group PricewaterhouseCoopers Pharmaceutical and Life Sciences Industry Group (www.pwc.com/pharma) provides clients with audit, tax and advisory services. The firm has extensive experience in delivering solutions on a wide range of strategic, financial and operational issues. The Pharmaceutical and Life Sciences Industry Group is part of PricewaterhouseCoopers' larger initiative for the health-related industries that brings together expertise and allows collaboration across all sectors in the health continuum.
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