Writing in this same column for the December 1, 2012, issue of GEN, I proposed that the biotech industry might be succeeding in part because of “creative acquisition”—the opposite of Joseph Schumpeter’s “creative destruction.”
As I explained then: “While creative destruction certainly applies to the biotech industry, so does what one might call creative acquisition. In other words, successful firms do not necessarily lead to the failures of other firms but rather to their own acquisition by larger firms. Creative acquisition is a function of the ever-increasing growth potential of the biotech industry.”
I also provided evidence of the biotech industry’s remarkable track record through the end of 2011, in terms of revenues, income, and the number of companies involved, even though many of the largest biotech companies were being acquired by big pharma. That the biotech sector kept growing could be attributed to technological advances, which continued to create numerous novel commercial opportunities, thereby enabling both the maturation of existing biotech companies as well as the seemingly never-ending formation and development of startups.
Since my initial column on creative acquisition, more data have been collected, further supporting the notion that creative acquisition plays a key role in the evolution of the biotech industry.
According to Ernst & Young’s Biotechnology Industry Report 2013, all 316 U.S. public biotech companies reported total revenues of $64 billion and net income of $4.5 billion in 2012, representing increases of 8% and 36%, respectively, over the corresponding figures for all 315 U.S. public biotech companies in 2011.
A more detailed look of the biopharmaceutical segment was obtained by accessing 10-K filings with the SEC. In 2012, the 10 largest such companies reported total revenues of $44 billion and net income of $11 billion, up 15% and 19%, respectively, from the corresponding figures for 2011. Of particular interest is that only the four largest have resided among the top 10 since 2005. Six of the top 10 companies in 2005 were acquired by big pharma during the six years that followed. Yet, total revenues and net income of the top 10 in 2012 were 38% and 77% greater, respectively, than those of the top 10 in 2005.
Based on revenues, the 10 largest U.S. biopharmaceutical companies in 2012 were, in descending order: Amgen, Gilead Sciences, Biogen Idec, Celgene, Vertex Pharmaceuticals, Regeneron Pharmaceuticals, Alexion Pharmaceuticals, Cubist Pharmaceuticals, United Therapeutics, and Biomarin Pharmaceutical. Eight of these companies were among the 10 largest in 2011.
Amylin Pharmaceuticals, ninth largest in 2011, was acquired by Bristol-Myers Squibb in 2012. ViroPharma, which was the 10th largest in 2011, dropped down to number 12. Regeneron, which was 12th in 2011, rose to sixth place in 2012, its revenues tripling from $446 million to almost $1.4 billion during the year. Biomarin moved up from 13th place to 10th.