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BIO Releases Reports on Industry Economy, Venture Capital

June 09, 2016

In the lead-up to the Biotechnology Innovation Organization’s (BIO) International Convention held this week, the organization released a series of reports on the health of the industry. Collectively, the reports indicate that the bioscience industry is seeing greater employment with better wages, increasing venture investment, but university and federal funding, patent filings and clinical trial success are leveling off or decreasing.

The Value of Bioscience Innovation in Growing Jobs and Improving Quality of Life, co-authored by TEConomy Partners LLC and BIO, reports robust results for the economic impact of the bioscience industry. The latest version of the biennial report indicates job growth of 2.2 percent since 2012, and 9.7 percent since 2001, to an industry employment of 1.66 million people in 2014. This growth has been felt in 35 states, with 10 adding at least 5,000 jobs since 2001, while eight states have lost a net of at least 1,000 bioscience jobs. Employment growth is not evenly distributed within sectors: “bioscience-related distribution” and “research, testing and medical laboratories” have seen the largest improvements in job growth, while “agricultural feedstock and chemicals” and “medical devices and equipment” have been fairly flat and the “drugs and pharmaceuticals” sector has a net decrease since 2001 but has increased since 2012.

The story for bioscience wage growth is even stronger. The average wage for biosciences professionals is $94,543, ranging from $117,524 for “drugs and pharmaceuticals” to $79,537 for “medical devices and equipment,” according to the report. All sectors compare quite favorably against the total private sector average wage of $51,148. Since 2001, the sector has seen wages increase by 19 percent -- more than triple the national average.

The Value of Bioscience Innovation points to robust VC funding for the biosciences industry. The report finds $14.4 billion of annual VC investments in 2014 and 2015, an increase from the $10 billion invested in 2012 and 2013. Biotech companies focused on humans (compared against animal, equipment, industrial and research) garnered 44 percent of this investment, with medical therapeutics and medical/health info technology a distant second and third, respectively, and all other sectors of the industry attracting no better than 5 percent of investments.

A separate BIO report, Emerging Therapeutic Company Investment and Deal Trends, provides additional detail on investments in therapeutics. From 2006-2015, $41.6 billion of VC funding was invested in emerging therapeutic companies, with $6.9 billion invested in 2015 alone. Between 2006 and 2014, the industry averaged 301 investments at $12.9 million each. Following general VC trends, 2015 saw a spike in deal size to $23.8 million, absorbing $3 billion of increased investment among just 292 deals. When comparing specific diseases, oncology opened a sizeable investment lead over the period, nearly doubling the investments of the next biggest type by 2015. Comparing 2006-2010 investments against 2011-2015 investments, VC firms are increasingly interested in platform, metabolic and neurology treatments (in addition to oncology) and are losing interest in endocrine, respiratory and gastrointestinal therapeutics.

The robust VC support for biosciences innovation is offsetting stagnant or declining financial support from the industry’s traditional supporters -- the National Institutes of Health and higher education. Since 2012, The Value of Bioscience Innovation reports that funding from NIH declined by 3 percent, or $700 million to 2015, and by $1.3 billion since 2009 (not including stimulus funds). Meanwhile, university bioscience R&D expenditures increased by $800 million from 2012-2014, but at a slower rate than in previous reports. Looking just at 2012-2014, the years for which comparable data are available, total funding for biosciences from NIH and universities combined was a net $1.6 billion lower than if 2012 funding had remained constant.

A similarly mixed story for outcomes is also evident in BIO’s new reports. The Value of Bioscience Innovation finds an increase in annual bioscience patents of 15 percent from 2012-2015. However, the improvement from 2013-2015 is less than 2 percent and actually down nearly 3 percent against 2014. In addition to this leveling-off in patents, Clinical Development Success Rates 2006-2015, a new report by BIO, Biomedtracker and Amplion, finds evidence that the probability of successful approval for drugs entering the clinical-trial phase is now less than 10 percent. This average is heavily affected by oncology drugs, which account for nearly one-third of trials but have a success rate of just 5 percent, and neurology drugs, which are 13 percent of trials and have an 8 percent success rate -- suggesting that therapeutic VCs, which are increasingly investing in these types of drugs, are really betting big.

All three of BIO’s new reports find evidence of recent changes in the bioscience industry that will have to be proven by time to be either outliers or trends. If the source of biosciences funding continues to shift away from institutions and toward private investment, then there may be associated changes in the underlying structures of the industry. On the other hand, the next few months or years could see a reinvestment by traditional institutions (this is the promise of the “Cancer Moonshot,” for one) that reasserts the historic norms for biosciences funding.

venture capital, bio