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Private Equity and Venture Capital Investment in the Global Pharmaceutical and Biotechnology Industry

  • February 2014
  • 58 pages
  • Frost & Sullivan
Report ID: 2027621


Table of Contents

Vigilance and Equanimity are the Needs of the Hour

Executive Summary

Key Trends in the Pharmaceutical and Biotechnology Industry The challenges posed by reducing margins, expiring patents, increasing compliance costs, and regulatory thrusts because of delayed approvals are forcing participants in the pharmaceutical and biotechnology industry to restructure and streamline strategies to cease the diminishing profitability and increase the returns from research and development (R&D). Though the returns from the pharmaceutical and biotechnology (pharma and biotech) industry have been on the decline compared to previous years, they are better compared to the performance of other industries. Key Trends
- Global decline in private equity and venture capital (PEVC) deals in healthcare (HC) is reflected in the decline of PEVC deals in the pharma and biotech industry.
- Venture capital (VC) deals in both the pharmaceutical and biotechnology sectors witnessed a decline in average deal value over the years, with an increase in rounds of investment.
- The deal value analysis showed a preference for mid-sized deals in both private equity (PE) and VC investment.
- Geographic analysis revealed the United States represents the largest share of deals, and the sectorial preference of investors varied across geographies.
- The strong comeback of initial public offering (IPO) in 2013 sends a positive outlook for investment in the pharma and biotech industry.

Key Terms Used in the Study

- Growth Capital/Private Equity is a private placement transaction in which an investment is made in a mature or middle-market company with the purpose of aiding its growth.
- VC is a private placement transaction that involves an investment in start-up, early, mid, late, or emerging companies. Industry
- Pharma and Biotech Industry comprises 2 sectors: Pharmaceutical and biotechnology. Sectors
- Pharmaceutical are companies engaged in the R&D or production of pharmaceuticals.
- Biotechnology are companies primarily engaged in the R&D, manufacture, and/or marketing of products based on genetic analysis and genetic engineering. This sector includes companies specializing in protein-based therapeutics to treat human diseases.
- HC technology are companies that provide information technology (IT) services primarily to HC providers. This sector includes companies that provide applications, systems and/or data processing software, Internet-based tools, and IT consulting services to doctors, hospitals, or businesses operating primarily in the HC sector.
- HC equipment includes manufacturers of HC equipment and devices. This sector also includes medical instruments, drug delivery systems, cardiovascular and orthopedic devices, and diagnostic equipment.
- HC providers and services include providers of patient HC services as well as dialysis centers, lab testing services, and pharmacy management services. This sector also has companies that provide business support services to HC providers such as clerical support services, collection agency services, staffing services, and outsourced sales and marketing services.

Big Pharma
Big Pharma is the collective term for the group that encompasses the largest participants in terms of revenue in the pharmaceutical sector. Big Biotech Big Biotech is the collective term for the group that encompasses the largest participants in terms of revenue in the biotechnology sector. Key Therapeutic Areas
- Anti-infective drugs are used for the treatment of infectious diseases.
- Cardiovascular drugs are used for the treatment of diseases involving the heart and blood vessels.
- Central nervous system drugs include antidepressants, anti-anxiety drugs, and anti-psychotic drugs used for delusions, extreme agitation, hallucinations, and paranoia. These drugs are used for the treatment of diseases of the brain and spinal cord and are referred to as mind- or behavior-altering drugs.
- Oncology drugs are used for the treatment of tumors/cancer.
- Pharmaceutical contract laboratories are establishments primarily engaged in the R&D of pharmaceutical products on a contract or fee basis.

Key study objectives include the following:

- To analyze the PEVC trends in the global pharma and biotech industry.
- To identify the key PEVC trends in the industry based on deals across sectors and the nature of buyers.
- To conduct a financial analysis of the deals with respect to investment characteristics.
- To identify, compare, and assess sectors that are current and potential hubs for PEVC activity.
- To arrive at strategic conclusions on the basis of observed key trends.

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