As of 2018, the US biotechnology industry accounted nearly 30% of the global market ranking first. It was followed by Europe with overall 18% market share and thirdly by China at 14% respectively.

• Definition / Scope
• Market Overview
• Top Market Opportunities
• Market Trends
• Industry Challenges
• Technology Trends
• Regulatory Trends
• Other Key Market Trends
• Market Size and Forecast
• Market Outlook
• Distribution Chain Analysis
• Competitive Landscape
• Key Market Players
• Strategic Conclusion
• References
• Appendix

Definition / Scope

The term ‘biotechnology’ means combining different advance technologies with biological systems or organisms themselves and in turn familiarize those technologies across various fields. The applications of biotechnology range from agricultural practice to medical sector.

The technology is important to develop microscopic and chemical tools as most of the tools produced under the scope of biotechnology are limited to a cellular level.

Some of the common types of biotechnology which is practiced in the US and around the world are:

Medical biotechnology: It is the use of living cells or other materials found in cells directed at improving human health. The technology is not only used in finding cures but also getting rid of diseases in advance. The science involves finding efficient ways to improve human health, understanding pathogen and human cell biology.

Other techniques to produce drugs involves study of bacteria, plant and animal cells to come up with effective solutions/products. Some of the common applications of biotechnology in healthcare & medicine sector include, pharmaceuticals & drugs, diagnostic testing, cosmetics and dietary supplements.

Some of the common biotech firms operating in this segment in the US are Johnson & Johnson, Pfizer, Merck, P&G, Abbott among others.

Agriculture biotechnology: The segment focuses on developing genetically modified plants to enable high crop yields and instill characteristics to those plants which allows them to resist stress factors such as whether or pests.

The practice allows scientists to identify a gene that causes it and transplant the gene to another plant so that it gains the same desirable characteristic and becomes more durable.

Some of the common applications produced in the US are: GM plants, animal & livestock medicine, herbicides & pesticides among others. Some of the common US firms operating in this space include, ADM, Cargill, Monsanto, Zoetis, Dow AgroSciences.

Industrial Sector: The application in industrial sector range to a large extent where production of cellular structures to production of biological elements are conducted.

For instance, replacing biological materials with concrete materials in construction industry, beer & wine manufacturing, replacing personal care, beauty & home care products with organic products. Some other applications include production of biofuels (renewable energy) and waste management & disposal.

US firms operating in this segment include, DuPont, Chevron, Renewable Energy Group (REG) and 3M.

Market Overview

• As of 2018, the US biotechnology industry accounted nearly 30% of the global market ranking first. It was followed by Europe with overall 18% market share and thirdly by China at 14% respectively.
• Some of the leading patent classes for the biotech industry in the US are pharmaceuticals and surgical & medical devices. On the other hand, US agriculture and industrial related biotech developments account for less than 10% of the biotechnology patents in the US.
• The development process of biotechnology product is expensive and complex which could take up to 15 years. In addition, the average annual cost to bring drug into the market is $1.2 billion and the new medicine is tested upon 1000 volunteers before being approved by FDA to be taken to the market.

Top Market Opportunities

Biotechnology truly has wide range of application across several industry verticals. In comparison to other developed countries in the world, US has been able to identify multiple innovative usage of biotechnology branch of life sciences. Some of the sectors where biotechnology is contributing significantly in the US are as follows:

• Biotechnology in Health, agriculture and industrial sectors: With its entry into the health sector, the technology has increased production in pharmaceuticals, diagnosis, dietary supplements and cosmetology. Similarly, in agriculture sector, the technology is creating medicines to eradicate animal and livestock diseases. Across industrial sector, biotechnology has huge scope for waste management, disposal and create biofuels i.e. renewable energy.

Besides biotechnology applications, the industry itself has also created demand for skilled people and has opened up lucrative opportunities for US citizens. In the US, total of 2349 public & private companies involved in the sector is providing their staffs’ annual average salary up to $88000 which is double the average US wage.

R&D in Biotechnology: Since 2013, the sector is receiving capital funds after being approved by National Institutes of Health (NIH). The research reveals that Boston region has received highest grants so far, followed by San Francisco.

NewYork was the leading state with highest production count while biotech in agriculture was more prominent in Chicago. In addition, in the US, pharmacy & medical devices were the most patented classes in Biotechnology.

More lately, biotechnology is being considered for treating one of the most exorbitant diseases in the country; obesity. Within next 10 years, every $5 spent on healthcare will be for obesity and related diseases which provides enormous opportunity for biotechnology sector to develop solutions for this problem.

VC for biotechnology on curing metabolic diseases has increased almost 25% followed by 10% rise in Opthtalmology treatment. Thus there is extensive scope for the Biotechnology sector whether it is within health or agriculture or with obesity offering wide market opportunities.

Both Research and investment is bolstering the biotechnology solutions across industries in the country.

Market Trends

In healthcare:

In 2017, the FDA affirmed its promise to speed up drug approval process for generics and novel therapeutics. The FDA is streamlining the approval of biomedicines and in vitro diagnostic (IVD) devices. The innovative approach is set to encourage development of targeted therapies which is likely to benefit companies especially those in oncology space.

Thus, biotech companies will be able to quickly bring innovative targeted therapies to the market. As FDA has reinstated confidence to large biotech companies by speeding drug approvals, there is much less risk in deals which is also bolstering the M&A activities in the industry.

In 2018, biotech industry has pool of acquisition targets and the market is likely to rebound further in 2019.

The recent tax reforms have reduced tax on cash held outside of the US. The cash held in overseas is expected to be around $150 billion for the industry. This excess liquidity will allow large biotech companies to take more risks especially in oncology where acquisitions are attractive.

In addition, with generics entering the market, confirmed by a record of 163 new generic drugs approved in 2018, biotechs’ require alternative revenue sources to beat the competition. To enable that, acquisitions are becoming an ideal solution which is leading companies to opt for M&A.

In agriculture:

Biotechnology is creating innovative ways to enhance food yield, grow crops in severe remote areas and acclimatize vital crops for durability. Developed countries such as US need to develop advance agricultural systems to meet the requirements of the population in Lesser Developed Countries (LDC) which is a widely accepted fact.

So, US and countries like US are investing in biotechnology to benefit farmers and population of LDC. Within agriculture, biotechnology is being used to produce genetically modified (GM) crops. The benefits of this technology is plenty such as, resistance to pesticides and herbicides, increase in crop yields, resistance to diseases and diseases.

Thus, after becoming familiar with such technology farmers across the US are utilizing it for growing crops through GM adoption. As a result, in the US, 88% of all the canola, corn, soy, cotton plants and sugar beets grown are genetically modified.

Industry Challenges

High risk levels: Generally, biotech products are patent protected which gives them market lead time to recover their R&D expenses and could receive huge rewards after their product hit the market. However, in contrast, the risks are also plenty.

First, the period of development during R&D process is lengthy with only hope that the product will be launched successfully.

Secondly, the expenses incurred in developing drugs could go high up to billion dollars.

In addition, biotech companies have to get approval for their drugs from the FDA so that they can sell it in the market which is another tedious process.

Similarly, during the clinical trials, FDA is constantly keeping a close watch and sometimes it is declared within the trial that the product is not feasible. The entire process could take up to 10 years and during that time, the firm is not making any profit on the product.

Finally, there are also chances of major technological developments occurring during the R&D phase that could have negative impact on the product.

In the US, around 36% of the drugs don’t make it past the preliminary stage of drug development, 68% don’t go above intermediate stage while 40% get knocked out in the final stage. Thus, a lot of money and time is invested which is risky in case a product fails.

Affordability: The cost of biotech drugs in the country is very high. Generally, R&D costs for developing such drugs are funded by the prices the medicines sell at the market. For instance, a common drug to treat cholesterol costs $5 per day which totals to $1825 annually.

Some biotech drugs cost up to $20,000 per year which is costlier and one of the major issue is affordability.

Privacy: As biotech is becoming more advance and capable of solving complex challenges in health, one increasing concern that is evolving is protecting patient’s privacy.

Biotech researchers are skilled in decoding an individual human being’s genetic composition it will also unlock information on the patient’s future health. This could lead to other problems such as, it will be possible to know whether a 6 year old child could develop serious heart conditions later in their life.

The major concern is this information could impact the person’s ability to get a job, mortgage or insurance. As patients become more aware about such implications of this technology there is demand for laws & policies to regulate data and privacy which is associated to it.

Society concerns: The biotechnology is such a technology which is exceeding the regulatory adaption and change and is creating issues in the industry. Some of the developments in the sector is causing direct impact in the human lives for instance, issues such as patenting genetic inventions, new drug development and stem cell research.

The development in genomics is causing artificial genes which presents serious threats to humans and environment in general. Other concerns include laboratory safety where safety of technicians in a laboratory is at stake especially when working with unidentified infectious organisms.

Finally, the major concern is that a number of biological toxins and infectious organisms could be used to attack animals, humans and plants. Some of the biothreats for humans exists across all branches of microbial kingdom that include, bactaria( plague, antharax), rickettsia (Rocky Mountain, typhus), viruses(dengue, small pox, fever agents), toxins (ricin, botulinium), fungi among others. These organisms if fallen under wrong hands could ignite bioterrorism.

Technology Trends

Some of the common technology trends that exist in the biotechnology industry are as follows:

Biosensors: Biosensors are operated by combining biological and electronic components which is used to measure and monitor several analytes such as organic compounds and bacteria with great accuracy.

These are deployed inside a patient’s body and are able to be monitored by external devices. These biosensors are also function as IoT and deliver data to physicians in real-time.

3D bio-printing: It uses ‘bioink’ material to create tissue like structures layer by layer. Much more research has to be conducted to make this application more prominent. As more appropriate bioink materials become available in the market, pills & drugs can be printed on-demand with much lower costs associated.

For now, bioprinted tissues are being used in research and generative medicine, printing living cells, creating functional tissues to repair and replace organs.

Tissue Engineering: The process combines bioengineering and biochemical methods to improve, replace or create biological tissues such as bone, blood vessels, skin, muscle etc. The process itself in collaboration with biosensors can also detect toxins, chemical and threat agents in the body. However, a more long term vision is to replicate entire organs of patients without patients needing transplants.

Gene Editing: The technology is being researched and developed thoroughly using CRISPR-Cas9 for precise insertion modification and deletion of DNA sequences in the genome.

The cost of genetic engineering has also drastically reduced after the use of the process in comparison to earlier methods. The CRISPR applications is allowing physicians to perform gene therapy at lower cost and more importantly prevent genetic diseases.

Synthetic Biology & Metabolic Engineering: It is more advance application of biotechnology which uses metabolic and genetic engineering to construct biological modules, systems or machines. For instance, most recent use case of the technology is using synthetic biology to produce synthetic meat.

This could reduce animal suffering and greenhouse gas production. This technology can further increase production of chemicals, fuels and materials from renewable biomass.

Nano Medicine: The technology is being brought into life with help of 3D bioprinting and tissue engineering. These nanotechnologies have wide applications in medicine. For instance, a biochemical Nanorobot can deliver small doses of drugs to precise locations or organs to reduce side effects and enhance quality of treatment.

These nanorobots have high scope in field of surgery where surgeons can leverage these to perform microsurgeries especially in difficult areas such as brain.

Big Data: With all of the above listed technologies that have been developed under several branches of biotechnology, the overall biotech sector is generating massive amounts of data.

Big data in turn is essential for gaining insights from large amount of data generated in areas such as genome and RNA sequencing, medical trial and public health. In addition, it also helps physicians to identify disease patterns and make better estimates in advance.

Regulatory Trends

In the US, both FDA’s Center for Drug Evaluation and Research (CDER) and Center for Biologics Evaluation and Research (CBER) are responsible for making policies related to therapeutic biological products including premarket review and oversight.

After a promising medicine is identified by the manufacturers, in an average, the medicine takes 10-15 years to R&D process to US FDA approval. Only 12% of the investigative medicine entering the clinical trial gets approved at last. Thus, an average cost to develop a new medicine is expected to be around 42.6 billion including cost of failure in the US.

The time to market for the drugs is long in the country as the regulatory requirements are stringent. In 2016, FDA approved only 22 new molecular entities (NMEs) and novel new biologics license applications (BLAs), fewest since 2010. Experts believe that this further suggests that 2016 is a sign of beginning of slowdown in approvals.

The US has been running behind in accordance with the rest of the world in providing clear approval pathway for Biosimilars. However, the incorporation of Biosimilar Price Competition and Innovation Act (BPCIA) into the Affordable Care Act in 2010 by President Obama is facilitating a large number of FDA approvals expected in the coming months and years.

Till date only 4 biosimilars have been approved in the US. In line with that, in January 2017, FDA took a giant step and released new interchangeability guidelines for biosimilars, bringing opportunities to existing and future drugs as more products can be substituted for a reference by a pharmacist without the approval of a health care provider.

Previously, US did have an “interchangeable” term for biologic medicines prior but it was absolutely separate from the “biosimilar” designation. The new guidelines coordinate these two tracks through three main avenues: switching, presentation and discussion.

Similarly, for improving Biopharma state in the country, US has introduced a new policy called 21st Century Cures Act in 2016. The bill funds medical research through National Institutes of Health (NIH) and also allows drug-makers to receive “real world” data on medicines instead of random clinical trials.

Other Key Market Trends

Some of the common trends in the biotechnology sector in 2018 are as follows:

Consumers as customers: The most recent era in the market is where the consumers i.e. patients are becoming clients for the biotechnology companies. Previously insurance companies and doctors were the target customers.

As an attempt to personalize medicine, the trend has shifted to creating drugs for each individual based on their state in the disease. For instance, a recent case that took place in the US where a 7 year old boy suffered with junctional epidermolysis bullosa – a condition where skin of the whole body breaks into blisters.

To cure this illness, a specialized gene therapy was use to grow compatible skin. Thus, rather than selling solutions to doctors, patients are being catered directly in line with their conditions.

Silicon biology: More recently, the entire sector has been adopting the horizontal and modular structure due to increase niche competitors evolving across industry segments.

For a silicon type modeling, the biology is complex, it is similar to driverless cars where putting a robot into real-world environment is complex. But, the industry is surely adopting a modularization approach.

Recruitment demands for specialized skill sets: As biotechnology market is rapidly developing in the country, demand for skilled individuals is also rising. The supply of such individuals is increasing greatly within the US and globally too. People who were previously working for large corporations are now establishing ventures across niche segments. Both demand and supply are increasing and thus no gap is likely to occur.

Market Size and Forecast

• As of 2018, the Biotechnology industry market size in the US was recorded at $112.4 billion where the market grew approximately 1.7% y-o-y in 2014-2019 period.
• In 2019, the Biotechnology market in the US is expected to reach $116.3 billion registering growth rate of 3.5%.

Market Outlook

• In the US, the biotechnology market is expected to rise at CAGR of 5.4% during 2019-2023 period. In addition, a sharp deceleration is expected by 2020 in anticipation of a possible cyclical downturn in US economy and continued political uncertainty.
• Overall biotechnology products are expected to contribute rise in sales reaching 52% of top 100 sales by 2024 from 49% in 2018. In 2019, biotech is forecasted to represent 30% of the global market and by 2024 34% respectively.
• In the US, gene therapies and cell therapies are growing in an accelerated manner. The Chimeric Antigen Receptor T-cell (CAR-T) therapy market is forecasted to increase at an annual rate of 51% during 2018-2030 period. In the US, the first two CAR-T immunotherapies got approval by FDA in 2017. Further, US accounts almost 40% of the global share in this segment where it dominates the market solely and 100 more products are in trial in 2018 alone.
• US is also the largest generics market in the world where generic drugs account for majority of the drug sales in the country. In 2019, generic drug shortages are likely to continue due to issues with manufacturing quality and capacity. Due to public and government enquiry of generic price increases, companies are revaluating their portfolios including divestiture of low-margin products.
• Finally, in 2019, FDA is also set to launch its software precertification program for Software-as-a medical device. The agency will review previous software approvals and test its model on some new software. Digital health companies in the US are set to authorize 38 new software in 2019 up from 31 in 2018.

Distribution Chain Analysis

• The top 5 leading areas receiving funding from both public and private sources for R&D in biotech include, Boston, San Francisco, San Diego, New York and Philadelphia.
• Annual VC funding received by Boston and San Francisco equals around more than $1.5 billion whereas other regions from top 10 receive less than $1 billion annually.
• In the US, biotechnology clusters are formed depending upon the functional areas. Major establishments are clustered around three regions: Midwest, California and Northeast. Companies such as Abbott, AbbVie, ADM, Medtronic, Eli Lilly, Baxter, P&G are located in Midwest, Others such as Amgen, Genentech, Gilead, Theranos are in California and finally, Pfizer, Merck, Johnson & Johnson, Celgene, IBM, Biogen Idec are in Northeast respectively.
• Based on the biotech specialization companies are scattered around various regions. General Testing & Research facilities are located mostly in states such as Boston, Los Angeles, San Francisco Bay area. Drugs & pharma companies are located in Chicago, Los Angeles, New York, and Philadelphia. Agriculture based biotech are located in Houston, Tampa, Memphis & Chicago and finally, bioscience distribution across Chicago, Miami, Dallas &New Jersey.

Competitive Landscape

In the US there are approximately 2349 companies involved in the biotechnology sector including both private and public. Till date, the number of biotechnology patents that have been registered totals 24,939.

Some of the top commercial R&D spenders in the biotechnology are dominantly based in the US. Among top 15 spenders around the world, 9 are US based that include companies such as Johnson & Johnson, AbbVie, Merck, Pfizer among others.

In the US, biotech R&D activities are increasing at a CAGR of 6.4% every year. Several universities, startups and corporations are equally dedicated towards supporting such activities.

In line with that, Bioscience R&D expenditures at colleges and universities across 10 states totaled $22.5 billion with academic institutions in California alone spending $5.1 billion respectively.

The Largest biotech companies are also increasing 20% of expenditure annually in R&D activities. Most of the startups in biotech in the US are based either in oncology or neurology.

Besides universities, startups and corporations there are two major factors behind growth of biotech scene in the country. NIH (National Institutes of Health) and Venture Capital funds are contributing towards biotech innovation. NIH which is public agency located outside of the Washington DC is the leading source of funding for the companies.

Annual funding of NIH totals around $22.5 billion. On the other hand, VC firms specialize in scaling up and commercializing the research done in labs. Some of the leading biotech focused VC firms in the US are Healthcare Ventures and MPM capital.

Other public funding sources include, National Science foundation (NSF) and Department of Defense (DoD). Private funding sources for academic research include, charitable organizations like Alferd P. Sloan Foundation and various corporate foundations such as Intel Foundation.

Key Market Players

According to market capitalization, the largest Biotechnology companies in the US are as follows:

• Johnson & Johnson
• Pfizer
• Merck & Co.
• AbbVie
• Amgen
• Abbott Laboratories
• Eli Lilly & Co.
• Bristol-Myers Squibb
• Gilead Sciences
• Biogen

Strategic Conclusion

The biotechnology sector itself is unique considering the factor that it has still not reached all-time high in contrast with other sectors in the overall growing market of the US.

More recently, a clarity has been set in the current US administration policies which has made the future of pharma and large biotech companies favorable. In addition, FDA is becoming transparent in its task to speed up drug approval timeline for both generic drugs and targeted therapies which is benefiting the biotech companies highly.

More recently, the tax reform has allowed large biotech companies to have greater enthusiasm for M&A deals which shows that the industry is in a solid spot going into 2020.

References

1. https://www.conserve-energy-future.com/biotechnology-types-examples-applications.php
2. https://www.business-sweden.se/contentassets/18ee91f4556b41a5a4445976bbe07e0d/biotech-industry-in-the-u.s.—fact-pack.pdf
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10. https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Life-Sciences-Health-Care/gx-lshc-ls-outlook-2019.pdf
11. https://en.wikipedia.org/wiki/List_of_largest_biotechnology_and_pharmaceutical_companies

Appendix

• GM- Genetically Modified
• DoD- Department of Defense
• NSF-National Science Foundation
• NIH- National Institutes of Health
• FDA-Food & Drug Administration