The 21st century has brought an acceleration in medical advancements including mRNA technology, stem cells, robotic surgery and telemedicine. More recently, biologics – or biological medical products – have been breaking new ground. Biologics involves creating medicines or vaccines using living organisms – or, parts of them. Below, we offer our latest industry report into biologics in 2023 including market overview, trends, key players, rising stars, investment risks and opportunities.
The global biologics market was valued at $335.43 billion in 2021 and is projected to grow to $817.48 billion by the end of 2032 – representing a compound annual growth rate (CAGR) of 8.5%. Biologic drugs are produced using components such as allergens, tissues and somatic cells from sources such as animals, microorganisms and even humans.
A crucial driver of the growth of biologics is concern about the rising global prevalence of chronic diseases. As populations rise, for instance, conditions such as rheumatoid arthritis become more common. The US is a case in point. Currently, the number of US citizens over 50 is 137.25 million – a figure which is expected to nearly double to 221.13 million by 2050. A 99.5% rise in chronic diseases is forecast over the same period.
North America, in particular the US, is the prime geographical driver behind biologics. Indeed, biologic sales are expected to dominate sales from pharmaceutical companies in the coming years – potentially overtaking small molecules (the current dominator) by $120 billion in 2027. In 2022, the US Food and Drug Administration approved 43 new biologics, with monoclonal antibodies comprising the most common modality for new drugs.
Biologics remain expensive due to factors such as complexity, the development process and competition. The average cost for biologic drugs is between $10,000 and $30,000, with the most costly drugs exceeding $500,000. This constrains the growth potential of biologics in developing countries despite many of them having ageing populations. Here, “biosimilars” could play a key role in widening availability to global patients. These are FDA-approved drugs which are very similar to previously-made drugs, such as biologics, from other companies. These are generally easier to manufacture and, therefore, cheaper.
Large, US-based established pharmaceutical companies hold the top spots in the global biologics space including Johnson & Johnson, Roche Holding AG, Pfizer and Abvie. The industry experienced something of a drop in market capitalisation in 2022 as demand for COVID-19 vaccines waned from national governments (which were moving past the “lockdown era”). However, the declining worldwide focus on COVID-19 arguably opens up space for other diseases/conditions, and possible medical solutions, to be attended to.
On the basis of product type, gene biologics are currently leading the way with a CAGR of 14.3% – with cancer the fastest-growing market segment between 2019-26. Key drivers to this trend, again, include ageing populations and rises in cancer cases. On the latter, cases are projected to increase primarily in countries with Low Human Development (HDI) rankings, from 19 million in 2020 to nearly 29 million by 2040.
Given the complex manufacturing process, intensive drug research and development (R&D) costs and strict government approval requirements, biologics remains largely in the domain of big pharma. However, there are still many exciting biotech companies emerging, particularly in 2023 as 100 biopharmas have cut staff and these highly-qualified people have sought employment elsewhere. This has helped dozens of biotech startups to sustain their growth.
Tempus is a case in point. Using artificial intelligence (AI) to pioneer the “precision medicine” model, Tempus is applying new solutions to cancer care and other urgent medical areas. To date, the company has raised $1.345 billion from the likes of Google and Baillie Gifford. Another example is Element Biosciences which offers affordable DNA sequencing systems for both research and diagnostic purposes. So far, it has raised $401 million in funding from JS Capital, Venrock and others.
Risks & opportunities
Investing in biologics holds out a lot of growth potential as markets continue to expand, driven by ageing populations (with associated medical conditions) and security concerns over pandemic control. Biologics often come with strong patent protections which help to secure future revenue streams for companies. Advancements in technology, moreover, present countless opportunities for innovation in drugs and therapies.
Conversely, investors need to be mindful of the regulatory challenges faced by biologics companies. The FDA may approve the majority of “first cycle” drug submissions, but far fewer make it through all hurdles to the market. Investors should consider the strength of a pharma’s drug pipeline carefully before committing capital, ensuring that their investment does not rest entirely on the success or failure of one therapy.
Market volatility, economic cycles, patent expiry and biosimilars are other factors to consider. There are also ethical and social factors to take into account, potentially affecting public perception and acceptance. Yet many of these challenges can be surmounted with careful investor due diligence. It will help investors to also keep a close eye on governments’ healthcare policies which could influence the prospects of their investment(s). Seek professional advice and consider the relevant risks and opportunities before committing to an investment.
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