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BOSTON and SAN DIEGO, June 24, 2014 /PRNewswire/ -- The global biotechnology industry rebounded strongly in 2013, with public companies achieving double-digit revenue growth and a sharp increase in funds raised. However, much of the industry's growth was driven by a relatively small group of commercial stage companies, increasing the urgency for the rest of the industry to achieve greater efficiency in their drug development efforts. These and other findings were released today in Beyond borders: unlocking value, EY's 28th annual biotechnology industry report.
Glen Giovannetti, EY's Global Life Sciences Leader, says: "The biotechnology industry, particularly in the US, is in the midst of a remarkable resurgence. Product successes have boosted revenues, drawn investors and motivated large companies to invest strongly in R&D. But the vast majority of firms continue to face a resource-constrained environment and heightened product scrutiny from payers and investors. More than ever, biotech companies of all sizes need to adopt strategies to capture more value from the discovery and development process."
Key results highlighted in the report include:
The challenge of unlocking value
Despite the strong overall financial results, most biotech companies operate in a resource-constrained environment, increasing the need to conduct R&D in capital-efficient ways. Meanwhile, other trends - including market entry agreements in which payers reimburse companies based on the performance of their products or strategic alliances with milestones tied to commercial performance rather than clinical trial results - make it imperative for companies to better measure and capture the value that their products create.
The report identifies three strategies for unlocking value from R&D:
1. Adaptive clinical trials: The long-standing clinical trials system of sequential Phase I, II and III studies creates few learning opportunities, and it results in R&D funds being tied up for multiple years and viewed as a sunk cost that is only reexamined as the drug advances to the next phase. Adaptive trial designs enable biotech companies to refine their hypotheses and reallocate R&D dollars in real time based on data generated in the clinic. While an estimated 20% of clinical trials being conducted today involve some type of adaptive design, these efforts are being led primarily by global pharmaceutical companies, with many smaller and mid-cap biotechs lagging in bringing adaptive trials to earlier-stage drug development.
2. Precision medicine: Biomarkers and targeted therapies allow companies to identify patient sub-groups that are most likely to benefit from a particular therapy, thereby mitigating drug development risk and potentially increasing valuations from stakeholders. Precision medicine can also provide companies with more certainty in risk-sharing deals, such as market entry agreements with payers or commercial-milestone deals with strategic partners. Yet, it is estimated that only about 100 biomarkers are routinely used in clinical care. Biotech companies should expand their use of these techniques.
3. Precompetitive collaboration: Cross-industry collaborations to solve common problems, such as establishing uniform clinical trial methodologies and developing standards for capturing real-world data, have flourished in the last few years. As with adaptive clinical trials, these consortia have been spearheaded by large pharmas, with most biotech players not yet engaged in meaningful ways. While participation in these efforts requires the commitment of resources, including capital and senior leadership time, it can offer benefits for companies seeking to avoid wasting precious resources on common challenges. In addition, involvement in such initiatives can help companies build trust with key stakeholders, which is particularly valuable at a time when payers and regulators are bringing more scrutiny to products.
Kristin Pothier, EY's Life Sciences Commercial Advisory Services Leader, says: "At a time when it is critical for companies of all sizes to conduct R&D as efficiently as possible, adaptive trials, precision medicine and precompetitive collaborations have the potential to unlock additional value that is trapped in the pipelines of biotech companies. To accelerate the adoption of these strategies, companies should embrace new kinds of partnerships to fill capability gaps, solve logistical issues and tap into the industry's impressive track record of adaptability in the face of new challenges."
Notes to editors
How EY's Global Life Sciences Center can help your business
Life sciences companies - from emerging startups to multinational enterprises - face new challenges in a rapidly changing health care ecosystem. Payers and regulators are increasing scrutiny and accelerating the transition to value and outcomes. Big data and patient-empowering technologies are driving new approaches and enabling transparency and consumerism. Players from other sectors are entering health care, making collaborations increasingly complex.
These trends challenge every aspect of the life sciences business model, from R&D to marketing. Our Global Life Sciences Center brings together a worldwide network - more than 7,000 sector-focused assurance, tax, transaction and advisory professionals - to anticipate trends, identify implications and develop points of view on responding to critical issues. We can help you navigate your way forward and achieve success in the new ecosystem.
EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.
EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.
This news release has been issued by EYGM Limited, a member of the global EY organization that also does not provide any services to clients.
 The Adoption and Impact of Adaptive Trial Designs, Tufts Center for the Study of Drug Development, 2013.
 Launch of a Transformative Health Care Initiative: The National Biomarker Development Alliance (NBDA), PR Newswire, 13 January 2014.
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