The biotech industry has really entered a new phase of growth over the past few years. The value of research and development spending has surged, mergers have accelerated the development ofexperimental drugs, and the industrys move away from blockbuster treatments has increased the drive to find as many new treatments as possible.
Over in the US, the Food and Drug Administration approved 41 new drugs for sale to the public last year, the highest number since 1996 and double the 10-year average. Meanwhile, thereturn on investment for R&D spendingrose in 2014 for the first time since 2010, to 5.5%, up from 5.1% the previous year.
Its not just the wider industry thats progressing. The UK three main pharmaceutical companies,AstraZeneca(LSE: AZN),GlaxoSmithKline(LSE: GSK) andShire(LSE: SHP)are all at key stages inthe development of their treatment pipelines. Whats more, all three are well placed to grow rapidly over the next decade.
Pipelines are key
Shire is planning to double its annual sales to $10bn by 2020 and the company plans to do this by concentrating on the development ofrare disease treatments. A small but lucrative market.
Shire is now in a better position to chase this growth than it has ever been before, after receiving $1.6bn merger break fee from AbbVie. Still, even without this break fee, Shire is already making steady progress towards its long-term growth target.Third-quarter revenues rose almost a third to $1.6bn, beating estimates and hitting a record for the company. Excluding exceptional items, earnings per share rose to $2.10, or 129p for the nine months to 30 September, up 93% year on year.
Meanwhile,Astra has developed an industry-leading immuno-oncology portfolio with 13 clinical trials already under way. A further 16 trials are planned and a total of 14 potential new drugs are already in the process of Phase III testing or registration before sale. As many as 10drug approvals are set for 2016. Astra has laid out anambitious growth plan to deliver annual revenues of $45bn by 2023, up from reported revenues of just under $26bn during 2013.
Glaxo hasnt set out a revenue target but the company is quickly adapting and changing its operations to put the group on a solid footing for growth. These deals include the asset swap withNovartisand a deal withAspen Pharmacare Holdings, Africas biggest generic drug maker.
Deals have also been conducted in Asia to boost Glaxos presence within the region.Whats more, the company has around 40 new treatments under development at present. These new treatments should only add to the companys growth.
Couple these new treatments with the projected growth in pharmaceutical spending over the next four to five years, and you can see how these companies are set to profit throughout the rest of the decade.
For example, Chinese spending on healthcare, per capita, is expected to increase by over 75% during the next five years. Global spending on medicines alone is expected to increase 30% to $1.3trn over the same period.
So overall, all the factors Shire, Glaxo and Astra need to achieve rapid growth are in place. It seems as if the sky is really the limit for these pharma companies.
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