2022 - Therapeutic Biotechnology Market Report

Starting in the 1990s, science began to play an important role in the development of new technologies that made it possible to increase productivity in production processes. In addition, it allowed increasing the efficiency of biotechnological products. This sector uses biological components, and living organisms, among others, to develop from medical products to biofuels (BIO, 2017). These products aim to increase the quality of life of human beings.

The Biotech sector is characterized by being a dynamic sector with high entry barriers (Guler, 2016). These barriers focus on the need for a large investment in research and development (R&D) to develop new products. The investment that must be made is not only for the development of the product but rather the sector has the peculiarity that the product must go through several testing phases (Hall & Bagchi-Sen, 2002). Investments made in the biotech industry are risky, as only about 9.6% of products that enter the first phase of testing are approved to go to market (Thomas et al., 2016).

In summary, the biotechnology sector is a rapidly expanding sector, according to data provided by Lee & Kim (2021), with an increase in patenting activities of approximately 418% between 1990 and 2017. In addition, this sector presents an income increase of close to 10% annual average for the case of the United States (Carlson, 2016). But despite this growth, the sector is also characterized by the presence of many barriers to entry and risk in its investment, due to the low rate of approval of projects.

This report was developed as a market biotech diagnostic, which characterizes the companies that compose the sector. For that purpose, financial and productive data of the most important biotech companies were collected. Subsequently, using our own methodologies (See Methodology Annex) we estimated the biotech therapeutics market size, growth projections, and projections of the trajectory of the products that were in different test phases for 2021. Moreover, you will find the top 5 startups to look for in 2022 due to their development potential.

Therapeutic Biotech market and companies’ characteristics

In the United States stock market, we can find approximately 468 companies developing at least a biotechnology product. In 2021 these companies presented revenues of U$D 1.7 trillion, wherein observed that 59% of the revenues are concentrated in 10 companies (Table 1). In this top ten with the highest revenues, we can find companies with different origins, 50% are American, 20% Swiss, 10% Chinese, 10% German, and the rest 10% from Denmark.

Even though these biotech companies have the highest revenue, they are not exclusively dedicated to biotech product development and manufacturing. If we consider the top ten United States stock market companies that develop and manufacture only biotechnology products (Table 2), the landscape changes a little. The 2021 revenues of the most important biotech-only companies are approximately U$D 94 billons. These revenues represent approximately 6% of the total biotech market revenues. It should be noted that of these companies, 70% are American, 20% are from Ireland, and the rest 10% are Danish. Moreover, the Danish company Novo Nordisk has the highest revenues in comparison to the others only biotech companies. Also, this company is in 8th position among the top 10 companies.

Therapeutic Biotech Market Size and Operating Metrics

Taking as a universe the 10 only biotech companies with the highest revenues, we estimated the biotech therapeutic market size for the stock United States companies. For that purpose, we estimated the biotech GDP for these companies and extrapolated the biotech market capitalization to find the estimated market size. According to our estimates, for the year 2017 the biotech market size was approximately U$D 358 billion, coming to approximately U$D 639 billion in 2022[1]. Therefore, we observe an accumulative growth, for the period 2017-2022, of the market size of approximately 78%. Moreover, it’s important to highlight the market size growing trend.

Taking into consideration the market size estimations for the 2017-2022 period, we estimated a compound annual growth rate (CARG) of 10,15% for the biotech market, for the next five years. According to this projection, the biotech therapeutics market size for the companies listed in the United States will be about U$D 940 billion. If our projections are correct, we will foresee an accumulative growth of the market size, for the period 2017-2022, of 163% (Figure 1).

With regard to operative metrics, in the 2018-2021 period, we observed a fall in the number of products found in phase I and an increase of products in phases II and III[2]. According to the approval rates for each phase relieved by Thomas et. al (2016), we will expect for 2022 that approximately 45 developments that started phase I in 2021 will be launched to the market. Besides, if we observe the final test phases, we will expect that 484 development in phase III pass to the pre-registration phase in 2022. And 43 of the developments in the pre-registration phase in 2021 will be launched to the market (Figure 2).

Biotech Startups

5 Startups to watch in 2022

The biotech sector stands out for its dynamism and the possibility it gives to emerging companies. This report enumerates five outstanding startups for 2022, either for their developments, their market capitalization, or for financing raised.

1. EQRx

Founded in 2019, this company focuses on the development and commercialization of molecules and biological products for diseases such as cancer and immunoinflammatory diseases. The company has five developments in the clinical stage, two of these in pre-registration. These two products are an epidermal growth factor receptor inhibitor (EQ143) and a programmed death-ligand 1. As of December 2021, the company had a market capitalization of USD 3.33 billion.

2. Compass Pathways

Compass Pathways is developing psychedelic treatments against clinical depression based on psilocybin, the main ingredient found in magic mushrooms. Psilocybin has been found to have long-lasting therapeutic effects in small studies, and it potentially has fewer side effects than traditional antidepressants. In 2021, the company completed a phase IIb study that showed a single dose of its treatment is effective in patients with treatment-resistant depression.

3. SomaLogic

SomaLogic is another relevant startup to watch for its technology and growth possibilities. This company was launched in November 2020 and obtained USD 214 million in Series A financing. This company has a proprietary platform (SomaScan) that allows monitoring, identifying, and diagnosing diseases through the concentration of proteins in biological samples.

4. Umoja Biopharma

Umoja is a startup founded in November 2020. This company is developing three platforms that would allow cancer patients to develop their own immune cells, which can eliminate cancer cells. The three platforms are in the preclinical phase, and the company obtained financing for USD 210 million in Series B.

5. LEXEO Therapeutics

LEXEO Therapeutics is a startup founded in 2021. This company uses developments based on gene therapy to treat diseases such as Alzheimer's and Batten's disease. In its first two funding rounds, LEXEO raised $185 million of which $85 million was raised in Series A and the remaining $100 million.

Mergers and Acquisitions (M&A)

In almost all industries, deals between companies or acquisitions of startups by large companies in the markets are of great importance. This importance means that the investment of biotech developments requires a large investment and a cost structure that not all companies manage to have and therefore the merger or acquisition of small companies becomes a fundamental activity for them to continue developing new technologies.

So far in 2022, mergers and acquisitions have been registered in the biotech market for approximately USD 6.5 billion (Table 3). It is important to note that approximately 33% of these acquisitions are biotech companies linked to cancer treatment.

Conclusions

The last 30 years have seen rapid growth in the therapeutic biotech market. In this report, a growing trend is shown since 2017, which will continue in the coming years with a compound growth of the biotech therapeutic market of approximately 11%. Additionally, this market is characterized by several barriers to entry and high investment risk. Because most products or developments that begin the testing stages do not reach the market.

On the other hand, it is in this market that startup-type companies begin to take a leading role in the development phase of new products and the first parts of these. Due to the large investment required to carry out the final stages of testing and commercializing the products, it is common to see large companies acquire the startups and continue with the tests and commercialization.

Methodology Annex

To calculate the market size, the GDP of the 10 companies with the highest income that exclusively develop biotechnological products and are listed on the United States stock market was estimated. This GDP was calculated as the sum of profits, salaries, indirect taxes, and depreciation and amortization for each company (Equation 1).

Subsequently, the previously calculated GDP was extrapolated to all companies listed on the United States stock market. To do this, biotech GDP was multiplied by the quotient of the market capitalization of all the companies that develop at least one biotechnological product with respect to the total market capitalization (Equation 2).

Finally, the following formula was used to calculate the CARG:

Where:

• GDP Biotechj = it is the GDP of j biotech for the I year.

• n= the number of companies

References

• BIO. (2017). The Biotechnology Ecosystem: By the Numbers. BIO. https://www.bio.org/toolkit/infographics/biotechnology-ecosystem-numbers

• Carlson, R. (2016). Estimating the biotech sector’s contribution to the US economy. Nature Biotechnology, 34(3), 247–255.

• Guler, K. (2016). From Entry Barriers to Survival Barriers: Entry Into the Biotechnology Industry. Academy of Management Proceedings, 2016(1), 14825.

• Hall, L. A., & Bagchi-Sen, S. (2002). A study of R&D, innovation, and business performance in the Canadian biotechnology industry. Technovation, 22(4), 231–244.

• Lee, S., & Kim, D. H. (2021). Knowledge stocks, government R&D, institutional factors and innovation: Evidence from biotechnology patent data. Innovation and Development, 1–19. https://doi.org/10.1080/2157930X.2020.1871462

• Thomas, D. W., Burns, J., Audette, J., Carroll, A., Dow-Hygelund, C., & Hay, M. (2016). Clinical development success rates 2006–2015. BIO Industry Analysis, 1(16), 25.