Biotech growth rate slowing	August 2008

IMS analysts expect that during the next five years the global biotechnology market will more closely parallel the traditional pharmaceutical marketplace, reflecting changing industry dynamics.

Global prescription sales of biotechnology drugs increased 12.5% in 2007 to more than $75 billion. According to research by the market intelligence company IMS Health, the global biotechnology market grew at nearly double the rate of the global pharmaceutical market, which increased 6.4% in 2007. Due to changing industry dynamics, however, IMS analysts expect that during the next five years the global biotechnology market will more closely parallel the traditional pharmaceutical marketplace. The market’s growth rate last year may have taken a step in that direction, moderating from the 18.2% rate experienced in 2006.

“After 20 years of what some would call a ‘charmed life,’ biotech is now facing a new reality,” says Murray Aitken, senior VP, healthcare insight, IMS (imshealth.com). “Loss of exclusivity and competition from biosimilars, crowded therapy areas with weaker sales growth, payers showing more reluctance to fund innovative drugs without compelling value propositions, and safety concerns for some therapies will all contribute to a more moderate growth environment through 2012. Yet, we expect the biotech sector to remain one of the most robust segments of the marketplace with a continued strong flow of innovative products to the market.”

According to IMS Health analysts, the past five years have seen a steady increase in the range of biotechnology products and their use in multiple therapy areas, creating a major source of market growth. Twenty-two biotechnology products generated sales of more than $1 billion in 2007, compared with six products in 2002. Last year, targeted oncology drugs, autoimmune agents, anti-diabetic agents, and pure vaccines represented the majority of the market and the majority of growth. The United States remains the largest market for biotechnology products, representing 56% of total sales in 2007. The five major European countries have steadily increased their share of this market during the past five years, to 24% in 2007. Japan’s share of the market has declined slightly and now represents 5% of global biotechnology sales.

IMS analysts identify five key market dynamics influencing future market growth. The first is continued strong flow of innovative products. The depth and breadth of the biotechnology R&D pipeline has never been stronger, with biotechnology products representing a full quarter of the total pharmaceutical pipeline. Although only three new biotechnology products were launched in 2007, a sharp reduction from 2006, the near-term pipeline is strong and includes six products that are expected to be launched by the end of 2009 that analysts say will potentially reach $1 billion in sales. These include innovative treatments for respiratory synctial virus, melanoma, and osteoporosis.

The second market dynamic cited by IMS analysts is intensifying scrutiny by payers to demonstrate the effectiveness and value of biotechnology products. As new innovative biotechnology products are introduced, the level of scrutiny by payers around the world regarding their value is expected to intensify.
Health technology assessment agencies are increasingly being used to assess the value of all biopharmaceutical products and recommend their inclusion on reimbursement lists at the national and regional levels in countries including the United Kingdom, Spain, Italy, Canada, and Germany. In the United States, health plans also are more rigorously assessing the clinical efficacy and economic rationale for using new products relative to existing, less expensive drugs.
Greater impact from product safety issues is the third key market dynamic. IMS analysts believe that the challenge of balancing patient safety with efficacy of treatment is particularly acute in many of the therapy areas where biotechnology products are an important part of treatment protocols.

The fourth key market dynamic is the growing competition among biotechnology products. In several key therapy areas, there is a growing level of competition between biotechnology products and alternative treatments, as well as among biotechnology products themselves. IMS analysts predict that market expansion increasingly will be predicated on the ability of companies that bring biotechnology products to market to use biomarkers or other means of differentiating treatment response in patient segments.

The final key market dynamic is emerging competition from biosimilars. Biosimilars, or follow-on biologics produced by companies other than the originator, are expected to have only a modest impact on the market over the next five to 10 years.

The introduction of biosimilar epoeitin alfa in European markets in 2007, for example, has had a negligible impact in the market to date. Meanwhile, the biosimilar product omnitrope, introduced in 2006, has captured less than 1% of the somatropic human growth hormone market. But IMS analysts believe that biosimilars represent a shift in the biotechnology marketplace that over time will bring emerging competition from biosimilars following the loss of exclusivity of original products. The regulatory approval process for biosimilars in the United States remains subject to legislative action and implementation by FDA, and is expected to be resolved in the near-term.

“In today’s market environment and for the foreseeable future, companies with biotech products in their portfolios will succeed only if they meet increasingly demanding regulatory standards, deploy effective commercial models that are accompanied by compelling evidence of their products’ value, and develop pricing and market access strategies that ensure that patients have access to the benefits that these new products deliver,” Mr. Aitken says.