The party shows no sign of stopping

It seems the biotech industry is still enjoying the dolce vita. Many doubted it could continue, but all the signs are showing that it has. Drug pricing has come out unscathed, while M&As seem to be safeguarded after the US government appears to have ceased its tax-law changes on them. To the contrary, investors are still hungry for all things biotech, with the industry’s valuations fluctuating at an impressive rate in 2015. So much so that 2015 is showing signs that it is to welcome as many as 50 new drugs to the market by year’s end, with a fifth-year sales forecast of a staggering $18.6bn.

Is all this growth and prosperity really sustainable?

The data tells us that the good times are going to keep on rolling. All the stock index indices were up for the year, and, incredibly, the vital Nasdaq Biotechnology index has risen a truly staggering 270% since the start of 2012 – it’s set to be triple its previous high from the boom times of 2000.

However, the road this year hasn’t been a completely smooth one. The love for biotech investment is often measured through the flotations on public markets, and Q1 of 2015 showed somewhat unflattering results. And while the second quarter saw a recovery, there is still work to be done if 2015 is to surpass the dizzy heights of 2014.

But the above is a blip on an otherwise highly impressive résumé – the VC-funding figures highlight this. So far this year $3.8bn has already been raised, and it looks like 2015 is on course to eclipse the staggering $6.5bn raised in 2014. And while the data shows that there has been a big drop in the number of funding rounds (VCs now prefer to invest bigger amounts in a smaller pool of companies), it can be seen that the biotech sector is only going from strength to strength.

On the M& A front, it was always going to be hard to surpass 2014’s record-breaking figures – $212bn of biotech and pharma deals. But $95bn is still impressive, and with a couple of big-ticket deals, we could still see 2015 reign triumphant.

The final beacon showing that all is well in the biopharma sphere is the US FDA approvals. New products are being approved and launched at lightening speed. This year, 2015 is scheduled to see 50 new small-molecule and biological product approvals in the US, and sales for these new assets for 2020 are set to reach $18.6bn. And thus far, 25 have been approved, covering $11bn of the 2020 sales forecast – the outlook looks very bright indeed. Don’t forget your sunscreen.

So will the second half of 2015 be as peachy as the first?

The first half of 2015 has proven the industry critics wrong. There has been considerable deal making, plenty of venture funding, while the share price indices all suggest that they are only going to grow even more. And, as unbelievable as it first seemed, if things continue on this path, 2015 has a real fighting chance of surpassing the astronomical figures set at 2014’s close.

It is often said that “what goes up must come down”, but it seems, for now and for the foreseeable future at least, that the biopharma market bubble is not ready to pop yet. Twenty-five drugs have already been launched, with more set to follow suit, with gargantuan sales forecasts set for 2020.

For the pessimists seeking some signs of industry decline, the ever-increasing price of drugs has led to payers pushing back while wanting reassurances that patients get value for money. And furthermore, a slight slowdown in the IPO market can be witnessed that could grant these naysayers some solace; however, this is offset by M&As and licensing, which are likely to maintain their rapid pace and keep the market ticking along nicely.

So, while the sector may see a timid slowdown in certain areas, all the encouraging financial data strongly suggests that it is safe from any sort of serious crash. Let the good times keep rolling.

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