Report Warns Of Revenue Challenges In Biopharma

Flat output from R&D labs, despite increased spending, will put pressure on revenue growth in the biopharma sector, according to a report from The Boston Consulting Group, "Rising to the Productivity Challenge: A Strategic Framework for Biopharma." The consulting firm's report says a gap in new blockbuster drug rollouts is partially to blame. Revenue growth in the 1990s came primarily from an increase in the number of blockbuster drugs produced: These drugs had a 105% growth rate from 1989 to 2004, while non-blockbuster growth declined 5%. Now that patent expirations are increasing, the stock of blockbuster drugs is approaching equilibrium, and the industry is threatened with the loss its main engine of growth. Meanwhile, promising drugs based on genomics are being developed but won't hit the market in time to offset the blockbuster expirations, the authors state. The report recommends reducing costs, enhancing the value of existing drugs and accepting product failures sooner to combat the expected dry spell. Another key finding is that while small biopharma companies account for less than 10% of market capitalization and R&D spending in relation to their larger brethren, small biopharma accounts for two-thirds of the industry's clinical pipeline. This sets the stage for even more intensive business relationships as larger companies seek to tap into this source of innovation.

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