All major industries are facing a tough ride with the current global financial conditions, but the pharmaceutical/biotech industry is taking steps to overcome this situation.
Even though this is a cash-rich sector compared to some other markets, it is still interwoven with many industries that are struggling. For instance, the pharma/biotech sector is linked the logistics, contract manufacturing, and financial services industries, all of which directly and indirectly impact the function of the pharma/biotech industry. Therefore, since some of these linked industries may not be fully equipped to face the current economic crisis, the entire healthcare chain could be affected.
The entire pharma/biotech industry network needs to be stable in order to avoid any hurdles in reaching the public with the necessary healthcare. Because of the unhealthy conditions prevailing in the other sectors, the healthcare market is facing a crisis which could include a delay in manufacturing/developing a new drug or the supplying of drugs to the end user. Thus, it is necessary for the pharma/biotech industry to understand the workings of the other sectors in order to deal with the economic crisis in an efficient manner.
Impact On Pharma/Biotech Industry
The top pharma/ biotech companies have access to around $8 billion in cash equivalents, short term investment, and cash as of Dec 2008. However due to the current global financial conditions pharma/biotech companies are implementing strategies such as consolidation through M&As, increased productivity measures, and slashing jobs. The pharma/biotech industry is also facing other tough challenges related to drug approvals, pricing and reimbursement, patent expirations, and drying pipelines.
The global pharmaceutical market is expected to grow around 3.5% to 5% in 2009 and is expected to reach around $825 billion in 2009. The forecast is based on (among other factors) the analysis of the current economic conditions, United States healthcare policy, and entry of generics in patent expiry therapeutic areas. Some of the expected changes in the market include:
Consolidation Wave To Attract Investors:
We have already experienced the consolidation of big pharma/biotech companies in the first quarter of 2009 and others are still in the works. As blockbusters fall off patent, organic growth has witnessed major hits. Pharma/biotech companies have resorted to inorganic growth through M&A’s. However, this growth cannot form a sustainable business model for long. This is a stop-gap arrangement, in order to stay afloat during patent expiration.
High focus on specialty driven therapies:
Most of the top selling drugs are facing patent expiration and are expecting competition from generics. Therefore, the pharma/biotech companies are focussing on the specialty therapies because of the expected higher ROI and less competition (few generic companies are expected to engage in developing complex molecules, and hence the competitive landscape is expected to be less crowded for speciality driven therapies).
High expectation for ‘pharmerging markets’ :
The ‘pharmerging markets’ — Brazil, Russia, India, China, Turkey — are currently transforming as biotech hubs because of high private and public funding. With low costs and high populations, these markets are expanding, which is driving the demand for innovative therapies.
Changes in the growth rate of developed markets:
The economic downturn might have a direct impact and reduce growth rates of the U.S. pharma/biotech market in 2009. Despite the economic downturn, the pharma/biotech market in EU-5 and Japan is expected to grow slightly compared to 2008. This growth is driven by an aging population and an increase in preventive healthcare measures.
High growth expected in generics market:
It is a golden era for generics market; around $26-28 billion worth of original drugs will lose patent in 2009 and more countries are planning to increase the use of generics. The generics market is expected to cross $70 billion in 2009 with a growth rate of around 6% to 8%. However, there is a high level of competition among generics in areas like pricing and margins.
Challenges In Regulatory Approval:
Regulatory approval has tightened in 2008 and new molecules which received approval were very low in 2008. In 2009, less than 30 molecules are expected to be launched. Out of this, five to six molecules are potential blockbusters.
Looking To The Future
The current global conditions have affected thousands of jobs and also restricted innovation. Most of the pharma/biotech companies are focusing on the key molecules which will bring in profits and investing in selected therapeutics. However, we can expect a better future because governments are lending a helping hand to the pharma/biotech industry. The key challenges faced by the current market include reduced R&D and innovation, a drop in late-stage pipeline drugs, competition for generics and biosimilars, regulatory hurdles, and pricing and reimbursement. However, these challenges will be outnumbered by future opportunities, such as an increase in demand driven by aging populations, preventive measures to control or stop the progression of a disease/disorder, an increasing relationship with industry and academia to bring out new solutions in healthcare, and an increase in the usage of biologics for better treatment outcomes.