The eu market for bioanalysis

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Summary Report – October 2003 PARIOFORMA LTD 55 Princes Gate Exhibition Road London SW7 2PN United Kingdom Tel: +44 (0) 20 7225 3538 www.parioforma.com PARIOFORMA

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Bioanalytical market, bioanalysis, pharmaceutical development, contract services

Transcript of The eu market for bioanalysis

  • 1. PARIOFORMASummary Report October 2003PARIOFORMA LTD55 Princes GateExhibition RoadLondon SW7 2PNUnited KingdomTel: +44 (0) 20 7225 3538www.parioforma.com

2. PARIOFORMA PHARMACEUTICAL R&D EXPENDITURE IN EUROPE AND USA 35000 30000Millions Euros 25000 20000 US 15000 EU 100005000 01990 2000 20012002eFIGURE The European pharmaceutical industry invested 18.9 billion Euros in R&D in 2001, and wasprojected to spend 19.8 billion Euros in 2002. This sum covers all R&D spending within EFPIA countries by national and foreign companies. However, despite increasing R&D spending in Europe it should be noted that Europe isgradually losing ground to the US as a locus of innovation. Between 1990 and 2002, R&Dinvestment in United States rose more than fivefold, while in Europe it only grew 2.5 times.Parioforma Ltd 55 Princes Gate London SW7 2PN United Kingdom www.parioforma.com 3. PARIOFORMAAmount spent in each country by national and foreign companies 60001999 20002001 5000Euros Millions 4000 3000 2000 1000 0 UKFinlandItaly SpainFrance NorwayBelgium Germany IrelandDenmark NetherlandsSweden SwitzerlandFIGURE 2 Parioforma Ltd 55 Princes Gate London SW7 2PN United Kingdomwww.parioforma.com 4. PARIOFORMABy location of mother company 120 100 97 Number of chemical entities 90807766 68 Europe 6361United States6052JapanOthers40 292056 4FIGURE 3 01988-1992 1993-19971998-2002 Parioforma Ltd 55 Princes Gate London SW7 2PN United Kingdomwww.parioforma.com 5. PARIOFORMA A major driving force behind the growth of the European Biotech industry was the flow of moneyinto dedicated mutual funds in the latter part of the 1990s up until 2000. In addition, countries such as The Netherlands and Germany were at the forefront of integratingstate and private capital to support the life sciences industry this had the effecting of initiatingmany new Biotech start-ups, notably in Germany who still lead Europe in terms of the number ofcompanies see figure 4. However, the impressive stock performances witnessed by European companies over this periodwas not sustainable. After a decade of 30-40% year on year growth in revenues, the Europeanbiotech sector stalled in 2002. The UK remains the dominant player with 43% of total market capitalization (9.4 billion) and37% (2.9 billion) of revenues. The current hostile financing environment is forcing companies to radically rethink theirstrategies, and further fall-out in the sector can be expected over the coming twelve months.However this is a cycle that has been experienced several times already in the US and will resultin a stronger and more robust industry in Europe. However, it should be noted that the number of profitable biotech companies is increasing andthe average loss per public company has halved over the past 4 years to 7 million. Europes public biotech companies now have 53 products in phase III clinical trials. Hencedespite the harsh environment companies are continuing to develop innovative products and apotential tidal wave of product successes is building up, which could transform the industry.Parioforma Ltd 55 Princes Gate London SW7 2PN United Kingdom www.parioforma.com 6. PARIOFORMA40013Private Public350 46300Number of Companies25062009347 2150 285 52331003 170151147 1241 50 82 2757068 35033180IsraelBelgiumItalyFranceGermanyDenmarkIrelandNetherlandsFinlandUKNorway Sweden SwitzerlandFIGURE 4 Parioforma Ltd 55 Princes Gate London SW7 2PN United Kingdomwww.parioforma.com 7. PARIOFORMA10 9 8 7 Billions Euros 6 5 4 3 2 1 0Industry market capitalisation UKSwitzerlandNetherlandsRevenuesIrelandFranceGermanyFIGURE 5 Source: Ernst & YoungParioforma Ltd 55 Princes Gate London SW7 2PN United Kingdom www.parioforma.com 8. PARIOFORMAParioforma Ltd 55 Princes Gate London SW7 2PN United Kingdom www.parioforma.com 9. PARIOFORMAFIGURE 7 500 450 400 350Millions Euros 300 US 250 EU 200 150 10050 0 20002001 2002e 2003e 2004e 2005e Source: RM Consulting, published data PhRMA, E & Y, Scrip, Pharmaceutical Compendium: CMR InternationalParioforma Ltd 55 Princes Gate London SW7 2PN United Kingdom www.parioforma.com 10. PARIOFORMA Figure 7 depicts the market forecasts for the North American and European bioanalyticalmarket development and discovery support. It shows modest, but sustained growth over the next few years; however, calculationsassumed a constant US vs. EU split of R&D expenditure over this period1. Given the currenttrend towards the US as a locus of innovation; figures might be biased slightly more in favourof the US over time. Market analysis revealed that the key drivers for market value are: the volume of new business arising, due to new candidates entering development there are an average 3,405 drugs2 in active trials worldwide with an estimated 1,362 candidates in trials 3 in Europe; increased outsourced volumes from medium sized Pharma and Biotechs these companies are traditional outsourcers; higher sample prices for increased complexity of biomolecule assays; increased range of possible assays at premium prices biomarkers, metabolite profiling, etc. The underlying market growth rate is positive - bioanalysis remains an attractive business.1 The R&D split for the year 2001 (EFPIA, PhRMA- Pharmaceutical R&D Expenditure in Europe and the USA): Europe: 41%; USA : 59%.2 Average number of Adis R&D Insight; IMS R&D Focus; Pharmaprojects.3 RM estimate based on the ratio of new entities by geographical region. Parioforma Ltd 55 Princes Gate London SW7 2PN United Kingdomwww.parioforma.com 11. PARIOFORMA Bioanalytical buying behaviour can be viewed as a factor of company size, company attitudeand the stage of development. Attitude, or the propensity to outsource, is both a function of company size and companyculture. Geographical location impacts on a companys social, cultural and economic heritages. Analysis of the European bioanalytical market highlighted some geographical trends: Particularly in continental Europe there can be very significant social costs that a company must pay foreach employee; it is also a highly regulated employment market this combined with low cost labormarket gives rise to the tendency for more to be done in-house in parts of continental Europe than in theUS; There is a trend to use European phase I units (notably in the UK) to avoid regulatory IND submissions however, phase II often returns to the US in preparation for FDA registration; Within Europe, the issue of language barriers can add further complexity, people preferring to deal with aservice supplier in their mother-tongue. There is also the concept of keeping work within nationalboundaries e.g. French companies prefer to deal with French vendors; Additionally, the buying process tends to be more formalized for US based companies who have welldeveloped procurement procedures such processes tend to be more embryonic for European basedpharmacos.Parioforma Ltd 55 Princes Gate London SW7 2PN United Kingdom www.parioforma.com 12. PARIOFORMA Market research indicates that the European bioanalytical business lags behind the US by asmuch as two years in terms of market development. The European business is also far more fragmented than in North America and is characterizedby: several new entrants in last 2 years e.g. York Bioanalysis, Xendo Labs; a great many small labs with 3 6 LC/MS machines; stand-alone labs, as opposed to full service CROs, offering a suite of bioanalytical services including LC-MS/MS and immunoassays; no dominant player MDS, unlike in the US, is not a strong player. The competitive situation in Europe is not as intense as in the US, and most labs are predictinggrowth in middle and upper teens. This is because they are not yet under the same degree of price pressure as in the US; in partbecause their prices are already much lower1, but also because mid-sized European Pharmacompanies have continued to maintain or grow their outsourcing in contrast to US Big Pharma. European Pharma companies also feel that they are getting good value from the contract labsand are less concerned about price than their US counterparts.1 See AppendixParioforma Ltd 55 Princes Gate London SW7 2PN United Kingdom www.parioforma.com 13. PARIOFORMA The bioanalytical lab market currently shows no signs of concentrating, with no lab-labmergers. Instead the trend has been to acquire or merge with complementary organisationse.g. PPDI + MRLI, Inveresk + ClinTrials, Icon + Medeval, AAI + MTRA; Cephac + ITECPharmacology; or for new entrants to buy their way in e.g. Parexel + CEMAF. These complimentary mergers link the bioanalytical services of one company to the clinicalservices of another with the aim of improving business lead generation and more importantlythe continuity of business from one phase to another. Europe has also been the focus for expansion for many US labs the UK in particular, forexample: ABC Laboratories N. Ireland (now acquired by CSS Analytical); Advion Biosciences Norwich, England; BAS Congleton, England; BioReliance Scotland; CentaLabs Cambs; England. Other well-known bioanalytical names in Europe include: Covance Harrogate, England; AAI Neu-Ulm, Germany; MDS Zurich, Switzerland; Quintiles Scotland, Sweden; Inveresk Scotland;Parioforma Ltd 55 Princes Gate London SW7 2PN United Kingdom www.parioforma.com 14. PARIOFORMA Despite the trend towards the US as a locus of innovation, Europe still exhibits healthy growthin terms of R&D spending see figure 1. In the past 5 years, Europe in particular has experienced vigorous M&A activity in thepharmaceutical industry. A consequence of this has been much pipeline pruning with delays,postponements and even cancellations in clinical programs. The effects of this are still beingfelt - see figure 3. However, worldwide drug pipelines are healthy with an estimated 1,362 candidates in activeclinical trials in Europe, including 53 products in phase III originating from Europes publicbiotech companies. Europe can be divided into bioanalytical hotspots according to R&D spending see figure 2:1. UK;Decreasing2. Germany;attractivenesson the basis of 3. France;R&D spending4. Switzerland;5. Scandinavia Norway, Finland, Sweden, Denmark;6. Benelux The Netherlands, Belgium;7. Italy;8. Spain. Parioforma Ltd 55 Princes Gate London SW7 2PN United Kingdomwww.parioforma.com 15. PARIOFORMA Germany still leads in Europe in terms of the number of Biotech companies see figure 4.However, there is a widening divide in terms of revenues and market capitalisation see figure5. The UK remains the dominant Biotech player and therefore, provides the most attractiveopportunity from a bioanalytical perspective. Not only are there a large number of Biotechcompanies themselves, but revenues are stronger these companies are more likely to be ableto afford and maintain clinical programs. This report would not be complete without mentioning the fact that Europe has a very maturegenerics industry that is facing a period of unprecedented growth - $82 billion worth of globalblockbusters are set to face US patent expiry by 2007. Rising competition from Indian and Eastern European low cost generic providers will augmentthe pressure on margins, forcing Western players to add value through specialty generics andsuper generics. For some labs the generic market is an attractive business; but unlike the research businessthis area is highly price sensitive - prospective customers shop around for the cheapestoption. It is particularly suitable for high volume players who can easily amortise the cost ofassay development. Entering this market can require considerable investment. Proprietary assays are usually ownedby the original customer, consequently a lab has to re-develop and validate an assay before itcan claim ownership and sell on to a generics customer. The economics of the business suggest that it takes 2 3 customers to break into profit perassay developed. Parioforma Ltd 55 Princes Gate London SW7 2PN United Kingdomwww.parioforma.com 16. PARIOFORMA Summary of Opportunities All three countries present an attractive opportunity for a bioanalytical business. The United Kingdom because it remains the main focus of R&D spending in Europe and continues to outpace the rest of Europe in this respect. It has the highest number of R&D bases and the most profitable Biotech industry in Europe. Employment laws are more favourable in the UK than in continental Europe; however, sales of a UK-based facility could be vulnerable to exchange rate fluctuations.United Kingdom Germany is also attractive from an R&D point of view. AAI is the dominant player and there are a number of local players Germany has not been the focus of expansion for US-basedGermanylabs as has the UK. Germany also leads Europe in the size and maturity of its genericsSwitzerlandindustry. For its size, Switzerland has a high density of R&D based companies and a high level of R&D spending. MDS is present but not dominant, and there are a number of well- established local players. A lab situated in either Germany or Switzerland is also well placed from a geographical point of view to serve customers in other parts of continental Europe. Attractive from an R&D spending point of view; but this market is heavily dominated by Aster Cephac and Parexel. Aside from these large players there are only a handful of smaller localFrance players. Parioforma Ltd 55 Princes Gate London SW7 2PN United Kingdomwww.parioforma.com 17. PARIOFORMASummary of OpportunitiesSweden and Denmark dominate in terms of R&D spending.The region supports a large number of Biotech companies, led by Sweden, but BiotechScandinavia revenues are very low in comparison to other countries in Europe.Norway, Sweden, In terms of suppliers, Quintiles has a small facility attached to a Phase I unit in Sweden butFinland and this is not well advertised. There are a few local suppliers, again mainly in Sweden, andmany sponsor companies traditionally outsource to other regions of Europe.DenmarkSales from a lab in this region would also be vulnerable to fluctuations in exchange rates. Itis probably not an area that would attract bioanalytical business from other parts of Europe.Already many low cost labs present notably in The Netherlands where governmentBenelux The investment helped initiate start ups in the life science sector.Netherlands and Many technical graduates at low cost and a highly regulated employment market hencemany R&D based companies find it more cost effective to conduct work in-house rather thanBelgium to outsource.Sponsor firms either conduct in-house bioanalysis or outsource to Northern EuropeanSouthern Europe companies. Some very small local labs only.Italy & Spain Parioforma Ltd 55 Princes Gate London SW7 2PN United Kingdomwww.parioforma.com 18. PARIOFORMASummary of OpportunitiesThe Czech and Slovak Republics, the Baltics, Poland, Hungary, and Slovenia will all be partof Europe as of May 2004.The domestic pharmaceutical industry in this region is dominated by the cheap localproduction of generic drugs. R&D bases of Western firms tend to conduct work in-house dueto the low cost of skilled labor as well as outsourcing to Western European companies.The CEE is now fast becoming the preferred location for many clinical trials due to theCEE relatively lower costs per patient (in comparison to Western Europe) as well as the need toaccess treatment naive patients.A lab in this region [e.g. Czech Republic] could leverage the cheap skills base and the easeof communication with the rest of Europe. There are at present, no well known bioanalyticalnames in this region.Parioforma Ltd 55 Princes Gate London SW7 2PN United Kingdom www.parioforma.com 19. PARIOFORMAGEOGRAPHY Mid 1990s (US $)2002 (US$) 2004/2005 US$USA} Average for Standard Assay$130$70$40USA } Range for Standard Assay $100 - 150 $60 - 80 $30 - 40Europe} Average for Standard$90$63$50AssayEurope} Range for Standard $84 - $98$50 - 90-AssaySource: RM estimates and analysisParioforma Ltd 55 Princes Gate London SW7 2PN United Kingdom www.parioforma.com 20. PARIOFORMARM Consulting is now part of Parioforma Ltd., an independent business consultancyheadquartered in London, UK.Key benefits of working with Parioforma: Bespoke studies tailored to client needs andtimelines. LONDON OFFICE ASSOCIATE OFFICES Affordable research prices makes your budgets gofurther. Intrix Corp, DarienCharles RowlandsUSA High quality research experienced science-basedConnecticutSenior Partnerteam, all with post-graduate science and/ or MBAqualifications and with 10-25+ years experience in Life Eastern55 Princes Gate IMRP, MoscowScience and High Technology industries. Europe Unique problem solving approach the team is Exhibition Roadhighly specialised, but diverse in experience and London SW7 2PN Intrix Corp, SoBrazilbackground, enabling analysis of problems fromUnited Kingdom Paulodifferent perspectives. Tel: +44 (0) 7803 907577 Strategic Pointers helps clients better understandwww.parioforma.comJapanTRN, Tokyothe research and implications for their business. Practical implementable solutions not justover-clever analysis.Our knowledge is extensive and experience Please dont hesitate to contact us for anbroad please visit our website for a full informal discussion either by telephone onlisting of all our services.+44 (0) 207 225 3538 or by email at:[email protected] Parioforma Ltd 55 Princes Gate London SW7 2PN United Kingdomwww.parioforma.com