Anyone who’s watched the biopharmaceutical landscape over the years is familiar with two large forces that reshape the list of companies in the area: on one end, you have mergers and acquisitions that decrease the number of firms, and on the other you have startups that increase it. How have these two been balancing out?
This paper in Nature Reviews Drug Discovery has some numbers. Since 2000, the lowest number of “consolidative” deals (where two companies become one by some means) has been 53, in 2002, and the highest number has been 120, in 2017. (The list excludes drug delivery, medical devices, generics, OTC companies, and animal health). You’d figure that this would be leading to larger and larger firms taking up more of the market, but in fact, the share of the market (by revenues) held by the top ten firms has actually gone down over this period (from around 50% to more like 40%). The share of total clinical (industry-sponsored) clinical trials and the share of total clinical trial enrollment held by the top 10 companies has been declining pretty steadily over that time as well. The same goes for novel products and the revenues from them.
That’s something that I’m pretty sure that most people were not predicting. Typical might be this 2002 article from the Harvard Business Review, which posits four stages of industry consolidation and says “Pfizer, in its recent acquisition of Pharmacia and Warner-Lambert, is a textbook example of a stage 2 company successfully positioning itself for the later rounds of consolidation that will yield the industry’s giants“. Well, we do have giants. But we have lots of others, too. Here’s another 2004 piece which is almost entirely about how everyone’s going to end up merging, inevitably. I will admit to having had some thoughts along those lines myself.
The authors of this new paper identify several trends that have delayed the expected mega-consolidation of the industry – the move to rare diseases, the rise of monoclonal antibody therapies (done at first by a number of players outside the big 10 companies at the time), the greater availability of outsourced services, and – in recent years – the relatively easy access to capital. I would add, in that “recent years” category, the various new therapeutic modes that are being explored (gene therapy of various kinds, RNA and DNA-based agents, protein degradation, etc.) many of which have a swarm of smaller companies involved in them. Some of them have been and will be bought out, but others are staying independent longer than one might have thought.
Maybe in the even longer term we will see the industry settle into a smaller number of mega-firms, but by now, I sort of doubt it. The sheer number of new things to try (and the number of ways to try them), the vast amount of important things we don’t know about disease, coupled with the huge rewards of getting something new to work, make me think that we have some factors working on our industry that you don’t find in many others. I think we’re set up for having fragmentation, nor do I think that that’s a bad thing, overall. There are so many unsolved problems that the more organizations that can bring their different approaches to them, the better.