CDMOs Buttressed by Resilient Emerging Biopharma Sector
Publicly traded emerging biopharmaceutical companies increased their research and development (R&D) expenditure in the second quarter of 2017, reaching almost $3.9 billion, 45% greater than the spending level seen in the second quarter of 2015 (see Figure 1, below).
Although the total R&D expenditure of emerging biopharma companies (around $15 billion annually) is a fraction of the $100 billion spent by global bio/pharma companies (25 largest by revenue), it is overwhelmingly outsourced. Service providers at all stages of the value chain, from discovery and early development service providers to manufacturers and clinical CROs, are major beneficiaries. It’s clear that the increased spending by early stage companies has driven the CDMO sector.
As these predominantly loss-making companies calibrate their expenditure in line with their ability to raise additional funds, the recent increase suggests that the sector remains confident in its ability to access additional capital. The ratio of total cash on hand to quarterly R&D spend rose to 4.8 from 4.4 in the first quarter, meaning cash balances rose even as R&D spending increased. Of the top 40 emerging biopharma companies with the largest R&D spending levels, 85% reported an improved financial position, with one-third having more than two years of cash. This will likely be earmarked to fund late-stage clinical trials.
This article is reprinted from the August issue of Bio/Pharmaceutical Outsourcing Report. The full article addresses the future of the contract services sector. To learn more, click here.