May 15, 2015 (Vol. 35, No. 10)

Growth Spurts, Bumper Crops, Successive Harvests of Top Firms—and Biotech Is Still Fertile

In modern biotech’s history, starting from the latter part of the 20th century, there have actually been two hockey sticks. The first one pertained to the period from 1990 to 2005. Data obtained from Form 10-K annual reports revealed that the 10 largest U.S. biopharmaceutical companies (in terms of revenues) reported total revenues of $1.1 billion for 1990, $4.9 billion for 1995, $10 billion for 2000, and $32 billion for 2005. Clearly, biopharma revenues accelerated in accordance with the trajectory of a hockey stick.

However, such acceleration was even more remarkable because of continuous turnover among the top ten U.S. biopharma companies, which was primarily due to acquisitions by larger pharmaceutical companies. Only five of the top ten companies in 1990 were among the top ten in 2005, and only two of them, Amgen and Biogen, remained among the top ten in 2014.

In discussing the financial status of the biotech industry in the August 1, 2013, issue of GEN, I noted that for 2012, the ten largest U.S. biopharma companies reported total revenues of $44 billion and total net income of $11 billion, which were 38% and 77% greater, respectively, than their total revenues of $32 billion and total net income of $6.2 billion for 2005.

While the net increase of $12 billion of the top ten’s annual revenue from 2005 to 2012 is not trivial, it is considerably smaller than the net increase of $22 billion from 2000 to 2005. This is readily explained by the acquisitions of Genentech by Roche in 2009, and of Genzyme by Sanofi-Aventis in 2011. The combined revenues of Genentech in 2008 and of Genzyme in 2010 exceeded $17 billion. If those two companies had not been acquired but just maintained in 2012 the same revenues they had reported in their final years as independent companies, then subtracting out the revenues of the top ten’s two smallest companies for 2012 would have resulted in a net increase of $28 billion of the top ten’s annual revenues from 2005 to 2012.

Nevertheless, for 2014, the top ten reported total revenues of $71 billion and total net income of $23 billion, which were 61% and 109% greater, respectively, than the corresponding figures for 2012, just two years earlier. Thus, the shape of the curve when plotting total annual revenues of the top ten from the beginning of 2005 to the end of 2014 again resembles a hockey stick.

Of further interest is that only four of the top ten companies in 2005 were among the top ten in 2012, because the other six were acquired by big pharma in the intervening years. The four companies in 2012 that were among the top ten in 2005 were also part of the top ten in 2014, but their relative rankings shifted over the years. In 2005, the first, fourth, fifth, and tenth largest biopharma companies with respect to revenues were Amgen, Biogen, Gilead Sciences, and Celgene, in that order. In 2012, the first, second, third, and fourth such companies were Amgen, Gilead Sciences, Biogen, and Celgene, respectively.

In 2014, Biogen and Celgene retained their relative rankings, but Gilead Sciences overtook Amgen to become the largest biopharma company. This was because Gilead’s product offering for treatment of hepatitis C virus infection had not yet reached the marketplace in 2012, but in 2014 those products alone resulted in $12.4 billion of revenues.

Moreover, an analysis of global pharmaceutical revenues of U.S. corporations, based on sales of prescription medicines, including generic drugs, that was displayed on the website, revealed that in 2014, Gilead Sciences, Amgen, and Biogen were among the 10 largest such pharmaceutical companies, ranking fourth, sixth, and ninth, respectively. In other words, big pharma now included Gilead Sciences, Amgen, and Biogen.

Regarding the remaining six companies in the top ten U.S. biopharma companies, the fifth and sixth largest in 2014 were Regeneron Pharmaceuticals and Alexion Pharmaceuticals, up from sixth and seventh, respectively, in 2012. The seventh and eighth largest in 2014 were United Therapeutics and Biomarin Pharmaceutical, up from ninth and tenth in 2012. The ninth largest in 2014 was Vertex Pharmaceuticals, which dropped from fifth place in 2012, due to declining sales of its product offering for treatment of hepatitis C virus infection; the product has now been withdrawn from the marketplace. The tenth largest in 2014 was Incyte, which was the 16th largest U.S. biopharma company in 2012.

Contenders for the top ten continue to be picked off by bigger companies. Thus, the eighth largest in 2012 was Cubist Pharmaceuticals, which agreed to be acquired by Merck & Co. toward the end of last year. ViroPharma, Auxilium Pharmaceuticals, and Onyx Pharmaceuticals, which were the 11th, 12th, and 13th largest in 2012, have since been acquired by Shire, Endo International, and Amgen, respectively. Dendreon, the 14th largest U.S. biopharma company in 2012, filed for bankruptcy protection in November 2014, and was sold to Valeant Pharmaceuticals in February of this year.

So, after reviewing Nature Biotechnology’s annual surveys of public biotechnology companies worldwide and then checking the Form 10-K filings of companies of interest, it appears that in 2014, Emergent Biosolutions, Acorda Therapeutics, and Seattle Genetics became the 11th, 12th, and 13th largest U.S. biopharma companies. They had been the 17th, 15th, and 18th largest such companies in 2012. SciClone Pharmaceuticals, which had been the 19th largest in 2012, moved up to number 14 in 2014.

One thing is clear. Even in an acquisition-friendly environment independent biopharma companies continue to grow. Some are acquired, but others take their place as frontrunners in the biotech world, such that the current revenues of the top ten surpass those of the top ten in prior years, even though the makeup of the top ten changes over the years.

Increasing advancements in deciphering life’s secrets, devising new therapies, speeding up the whole development process, and optimizing the likelihood of success will only ensure that the hockey stick will continue to frame the evolution of the biotech industry well into the future.

J. Leslie Glick, Ph.D.

J. Leslie Glick, Ph.D. ([email protected]),  is an independent corporate management advisor.

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