A new wave of science driven innovation is capturing the imaginations of investors.
Confidence is back and expectations are high with companies making strategic moves. Pharma company valuations have on average out-performed the main equity markets, as evidenced by the ARCA Pharma Index of US global pharmaceutical companies outperforming the S&P500 Index by 10 percent from January 2014 – March 2015. The effect of this has been to drive the industry Enterprise Value up by 31 percent over the last two years, and to shift Future Value positive for the first time since 2007 (reflecting investors valuing in Earnings growth).
This new investor confidence stems from the wave of new science based innovation sweeping the sector – as seen in the output of New Molecular Entities (NMEs) approved by the FDA hitting 41 in 2014, the highest level since 1996. Furthermore, the average annual output from 2011-2014 was 34.2 NMEs, that’s 53 percent higher than the preceding six years (2006-2011), and analysts forecast these elevated levels to persist over the next five years. Around two thirds of the NME approvals in 2014 were in specialty indications, and over half originated from smaller biotech companies or academia - which are increasingly seen as the innovation growth engines of the market.
It’s no coincidence then that we’re in a period of the big pharma companies making major strategic moves, to refocus on growth areas of the market (mostly specialty indications) and build portfolios with dominant market positioning. The High Performers have long been working on this, and continue to do so – whilst the rest of the industry is playing catch up, to find a path back to sustainable profitable growth. This can be seen in the record $364 billion life sciences M&A announced deal value seen in 2014, 177% above the 2013 total, a trend which looks to continue with the 1st quarter 2015 total ($83 billion) already 58% above the same period last year.
For more information on these findings, please read our latest High Performance Business Research: Turning Science Into Value: Biopharmaceutical Companies That Focus on Patient Outcomes are Finding Commercial Success.