EY Beyond Borders 2015

Section heading
Biotechnology Industry Report 2015
Beyond borders
Reaching new heights
Beyond borders Biotechnology Industry Report 2015
Section heading
To our clients
and friends
These are very good times for the biotechnology industry. For the
second straight year, biotech companies have delivered strong, and
sometimes unprecedented, results on almost every metric we track
revenues, profitability, financings, new drug approvals and more.
Across the biotechnology industry, these achievements have been
accompanied by optimism that the sector has entered a renewed age
of innovation, buoyed by both high-profile product breakthroughs and
scientific advancements.
Investors have not simply recognized these efforts. They have rewarded them. Market
valuations for biotechs reached new heights in both the US and Europe in 2014, and
the window for initial public offerings remained open for eight consecutive quarters, a
new record. As a result of the booming stock market, historic amounts of innovation
capital are available to the smaller players in the industry, which remain the wellspring
of future breakthroughs.
In this, our 29th annual Beyond borders report, Reaching new heights, we celebrate the
biotechnology industrys recent achievements. In doing so, we take stock of not just
where we have been, but the implications for the future.
We firmly believe the biotechnology industry cannot afford to become complacent.
In particular, the industry must continue to work with patients, payers, providers and
governments around the globe to devise not just new products for unmet medical
needs, but beyond the pill solutions that improve care delivery and health outcomes.
Moreover, the industry has a vital role to play in helping devise new payment and
financing schemes that enable access to the breakthrough innovations of the future.
At EY, we arent becoming complacent either. Long-time
readers will notice a change in the format of this years
report. Recognizing that time is a precious commodity,
we are moving away from issuing large, annual reports
to the more frequent publication of insights via a new
digital platform. Thus, we are unbundling in-depth
perspective pieces from our industry trend data to
enable readers to access our content when it is most
needed: in real time. You can join the conversation and
keep up to date with our latest perspectives at our new
digital home, Vital Signs (ey.com/VitalSigns), and our
Twitter feed (@EY_LifeSciences).
As biotechnology companies strive to solve harder
problems, EYs global organization stands ready to
help you reach even higher heights.
2
Glen T. Giovannetti
Global Life
Sciences Leader
Section heading
Contents
4
10
The year in review

Life of a start-up CEO: priorities and preparation
Katrine Bosley, Editas Medicine
12
The European biotechs strategic decision: list in Europe or the US?

Jrn Aldag, uniQure
14
Financial performance
15
The big picture
20
United States
28
Europe
31
Australia
32
Canada
33
Financing
34
The big picture
39
United States
47
Europe
54
Deals
55
The big picture
63
United States
65
Europe
68
Appendix
69
Acknowledgments
70
Data exhibit index
72
Contacts
The year in review
Beyond borders 2015
The year in review
The year in review
The view from the top
This was a year for the record books. On almost every measure we track revenues, profitability, capital
raised and more the industry reached new heights in 2014, spurred by a confluence of positive trends.
Sustained sales of high-profile products continued to boost investor sentiment. Examples include Biogens
Tecfidera and Gilead Sciences hepatitis C medicines, Sovaldi and Harvoni, which quickly became two of the
most successful product launches in the industrys history.
It was also a landmark year for new

product approvals, as a more supportive
U.S. Food and Drug Administration
(FDA) clarified the use of new expedited
approval channels for breakthrough
medicines. Against a backdrop of
booming stock markets and expansionary
monetary policies, these product
successes helped propel the biotech
industrys market capitalization above
the US$1 trillion threshold, a new high.
The news-making product successes
of 2014 had an outsized impact on the
industrys financial results. In particular,
the rapid ramp-up of Gilead Sciences
hepatitis C products significantly boosted
the revenues and net income of the sector.
Financial performance was also affected
by the large number of initial public
offerings (IPOs), which increased revenues
and R&D while lowering net income.
Across the four established biotech
clusters that we track the US, Europe,
Australia and Canada revenues
grew 24% in 2014. Adjusting for the
Gilead effect, revenue growth would
have been 12%, still ahead of the 10%
delivered in 2013.
Biotechnology at a glance across the four established clusters, 2014

(US$m)
Total
US
Europe
Australia
Canada
Public company data

$123,096
$93,050
$23,992
$5,794
$260
R&D expense
$35,387
$28,831
$5,576
$681
$299
Net income (loss)
$14,852
$10,618
$3,255
$1,066
($87)
$1,063,415
$853,862
$162,149
$42,177
$5,227
183,610
110,090
58,770
13,370
1,380
714
403
196
52
63
Revenues
Market capitalization
Number of employees
Number of public companies
Numbers may appear inconsistent because of rounding.

Source: EY.
Against a backdrop of booming stock

markets and expansionary monetary policies,
product successes help propel the biotech
industrys market capitalization above the
US$1 trillion threshold.
The year in review
R&D spending increased by 20% very

impressive and substantially above
the adjusted revenue growth amount.
R&D growth rates were strong in both
the US (22%) and Europe (14%). In
both markets, noncommercial leaders
expanded their R&D spending faster
than the commercial leader cohort.
Net income skyrocketed 231% to

US$14.9 billion, another historic high.
Most of this increase (82%) came from
Gilead. In the wake of the global financial
crisis, the biotech sector had reached
aggregate profitability for the first time
as a result of sharp cuts in R&D spending
across the industry. In 2014, on the other
hand, the huge increase in profitability
was for all the right reasons: strong sales
of newly launched products resulted in
even stronger increases in profits.
The US sector had one of its best

showings ever. Revenue grew 29%, or 12%
normalized for Gileads results. Adjusted
for Gileads performance, the unusually
large number of IPOs and the acquisition
of Life Technologies by Thermo Fisher
Scientific, US revenue growth would have
been an impressive 18%. R&D spend
grew by 22%, with nearly 70% of biotech
companies increasing their spending,
slightly above the historical average
FDA product approvals, 19962014

New molecular entities
Biologic license applications
60
50
Number of approvals
40
30
20
10
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
US product approvals are based only on approvals by FDAs Center for Drug Evaluation and Research (CDER).
Source: EY and FDA.
2009
2010
2011
2012
2013
2014
The year in review
While most of the growth came from US

commercial leaders, led by Gilead, the
rest of the industry more than held its
own, particularly in revenue growth and
R&D investments.
The significant uptick in US biotech
valuations drove a spike in the number
of pre-commercial-stage companies
with market capitalizations greater than
US$1 billion. As of 31 December 2014,
26 US companies reached this threshold,
up from just three in 2007.
The European biotech sector also put in a
very strong showing, although not quite
as robust as that of its US counterpart.
Revenue growth rebounded strongly,
reaching 15% in 2014 compared to the
modest 3% uptick of 2013. Adjusted
for the large number of IPOs, European
revenue growth would have been 14%
instead of 15%. R&D spending increased
by 14%, a strong turnaround relative
to 2013, when R&D spending actually
declined by 4%.
Net income increased by a very healthy
199%, to US$3.3 billion. This percentage
increase didnt match the steep growth
rate of 2013, when net income soared
by 462%. Adjusted for the US$1.6 billion
breakup fee Shire received when AbbVie
called off the proposed merger between
the two companies, net income growth
still would have been an impressive 52%.
Since 2007, there has been a dramatic increase in the number of US

precommercial companies with market cap >US$1b
30
25
Number of companies
of about two-thirds of companies. Net

income almost tripled, reaching a new
high of US$10.6 billion.
20
15
10
2007
2008
2009
2010
2011
2012
2013
2014
Only therapeutics companies are included.

Pre-commercial companies only have assets that are at the pre-approval stage.
Based on market values as of 31 December of each year.
Source: EY and Capital IQ.
Global R&D spending increased by 20%

very impressive and substantially above the
adjusted revenue growth amount. In the US
and Europe, noncommercial leaders expanded
their R&D spending faster than the commercial
leader cohort.
The year in review
Financing
The biotech bull market drove an
extraordinary surge in IPOs and follow-on
financings. Capital raised via US and
European IPOs rose a remarkable 93% to
US$6.8 billion in 2014. This annual total
was the second-highest in the industrys
history, second only to the US$7.8 billion
raised during the genomics bubble of 2000.
While the IPO class of 2014 may have
netted less capital, the companies that
listed during the most recent window
were more mature than those that
debuted in 2000. Eighty-one percent of
the members of the 2013-14 class had
lead candidates in Phase II or later, and
the majority retained the rights to their
products. Meanwhile, capital raised in
follow-on offerings increased by 49% to
US$13.8 billion, setting a new record.
Venture capital increased by 28% to

US$7.6 billion the second-highest total
on record and considerably higher than
the US$5.5 billionUS$5.9 billion raised
annually between 2008 and 2013. In a
positive sign for innovation, early rounds
generated US$1.8 billion, a greater
total than at any point in at least the last
decade. At US$10 million, the median deal
value recouped by early-stage firms was
also the largest dollar amount since 2006.
Debt financing also soared to a new
record, reaching US$26.0 billion, or
more than twice the 2003-13 average.
This was driven, as in prior years, by the
ability of large companies to raise funds
at low interest rates to refinance existing
debt, fund working capital and finance
share repurchases. Five large companies
closed six debt transactions of more than
US$1 billion each.
For the second year in a row, the

biotechnology industry enjoyed
robust gains in innovation capital,
which reached a new high of
US$27.6 billion in 2014.
8
The year also brought good news for

innovation capital, a metric we defined
to track the funds raised by companies
with revenues of less than US$500 million.
As such, innovation capital is a key
measure of the sustainability of a broad
swath of biotech companies that depend
on the capital markets to fund R&D. For the
second year in a row, the biotechnology
industry enjoyed robust gains in innovation
capital, reaching US$18.6 billion in 2013
and a new high of US$27.6 billion in 2014.
This represents a 120% increase from
the annual average of US$12.5 billion
achieved from 2009 to 2012.
The US biotech sector set new records
in total capital raised (US$45.1 billion)
as well as funds raised through
IPOs (US$4.9 billion) and debt
(US$23.9 billion). Biotechs raised
US$5.6 billion in venture financing
(slightly behind the US$6.1 billion raised
in 2007), while follow-on financings
reached US$10.7 billion (second only to
the almost US$13 billion raised in 2000).
Increases in financing totals were equally
strong in Europe, where the biotech sector
racked up its strongest performance in
the history of the industry and posted the
second-strongest performance in each
individual financing category. European
companies raised US$9.2 billion, a
year-over-year increase of 53%, and 97%
more than the previous 10-year average.
European biotechs raised US$1.9 billion
through IPOs, US$2 billion in venture
capital, US$2.2 billion in debt financing
and US$3.1 billion in follow-on offerings.
The year in review
Deals
This was a standout year for M&A and
alliances involving biotech companies,
as several trends made this a sellers
market. Booming stock market valuations
gave biotech companies more financing
options and, therefore, more power at the
negotiating table. This bargaining power
was further boosted by the fact that big
pharma companies have been eager
to acquire commercial-stage biotech
companies to address revenue shortfalls
that have arisen due to pricing pressures,
slower growth in emerging markets and
R&D challenges. In addition, big pharma
companies face more competition for the
best assets from specialty pharma firms
and big biotechs.
M&A activity reached a 10-year high
in both deal number and value (after
normalizing the numbers to exclude
megadeals, which we define as
transactions valued at US$5 billion or
more). There were 68 biotechnology M&A
deals with a total value of US$49 billion,
a 46% increase over 2013. Adjusting for
megadeals, pharma companies spent
more on biotech acquisitions than at any
time in the previous seven years.
On the alliance front, biotech companies

entered 152 licensing deals worth
US$46.8 billion in 2014, making it the
most lucrative year for those seeking
alliances. As was the case for mergers and
acquisitions, in 2014 biotechs captured
more of the total potential alliance value
at a deals signing than at any time
since the financial crisis. Indeed, as a
percentage of total deal value, up-front
payments reached 11%, while the total
dollars paid up front for alliances soared
96% to US$5.1 billion.
In a sign of the
increased bargaining
power of biotech
companies, acquirers
paid significantly
higher deal premiums.
Reasons to celebrate
The biotechnology industrys strong
performance in 2014 across so many
different metrics is a reason to celebrate.
Inevitably, there will be declines in some of
the measures we track as we cycle out of
the current boom period. Having reached
new heights, however, it is worth taking a
moment to reflect on just how much the
industry has matured. Indeed, the view
from the top is pretty good.
In a sign of the increased bargaining

power of biotech companies, acquirers
paid significantly higher deal premiums.
They also paid more up front. Only 33%
of the M&A transactions signed in 2014
featured future earn-outs, down from
45% a year earlier.
The year in review
External perspective
Life of a start-up CEO:

priorities and preparation
Katrine Bosley
CEO, Editas Medicine
Everyone has some idea of what biopharma CEOs do, based on what you can see as a team member within a
company or as someone watching the industry from outside. In general, though, I find that these views usually
see only part of the picture.
I didnt fully appreciate this until I first
stepped into the CEO role. For every
visible part of that role, theres a lot that
happens behind the scenes. It takes a
while to figure out where to focus your
time as a CEO, and there are areas that
require much more time and energy
than I had anticipated. Three of these
areas are the board of directors, external
engagement and capital strategy.
I found that biotech CEOs can lean on
three different groups for advice and
perspective: their senior management
team, their board of directors and their
fellow CEOs. With my internal team,
we discuss everything from the vision,
strategy and values to organizational
development, day-to-day management
and operational issues that are central to
building a biotech.
I tap my CEO posse for advice and
real-time, been-there-done-that
perspectives. In many cases, these CEOs
are shepherding companies that are two
to three years ahead of mine in terms of
their evolution. That means I get both
critical outsider views from this group and
10
also advice on what steps to take now to

create the right foundation to build my
company longer term.
Board matters
The board, in my mind, is first and
foremost a resource. Like my peers, my
board also provides an invaluable external
perspective because the other directors
have diverse experiences, and they have a
bit of distance from the day-to-day details
of the company. Intuitively, I expected
my board would help me make important
industry connections and supply me with
hands-on knowledge on all the companys
strategic issues. What I didnt fully grasp
initially was what an important role they
would play in pressure-testing my point of
view and how vital that would be to finding
the right balance between charging ahead
toward a goal and changing course.
I spend about 20% of my time preparing for
or meeting with my board members, both
formally and informally. That sounds like
a lot of time. Still, given the complexity of
building a biotech company, theres never
enough time to address each and every
issue in detail. To get the most out of my

board meetings, I have found it helpful to
write down two questions to be the focus of
a board meeting and to open the meeting
with those questions. Limiting it to just two
questions really forces you to prioritize and
helps to make sure the face-to-face board
time is spent on the right issues.
External engagement
I also spend a lot of time focused
externally, whether its a media interview
or at conferences or interacting with
current or potential investors or recruiting.
There are many different stakeholders
youre always communicating with
and listening to: patients, scientists,
physicians, regulators, employees,
investors They all pay attention, and all
are crucial to building a company.
While the actual time spent in external
encounters may be short, the preparation
time beforehand is considerable. CEOs
need to plan out and practice how they
want to communicate on a broad range
of issues, from strategic to financial to
scientific. To tell the story effectively,
The year in review
CEOs need to create a narrative that

explains how the business will unfold over
time and to adjust that narrative to be
accessible to many different audiences.
These worlds do often overlap. For
example, specialist biotech investors attend
most of the critical scientific conferences.
Those research meetings are an important
and different way to engage with the
investor base as well as connect with the
scientific community. They allow you to
show investors how the story continues to
advance, furthering relationships that can
support future fundraising efforts before
the company needs the money.
Capital strategy
Of course, I spend a lot of time on
fundraising. As the CEO of a biotech
start-up, Im always planning two or three
financing steps ahead, identifying how
to tap diverse pools of capital for my
companys needs.
I find it helpful to think in a multi-year
time frame to plan and to set goals. A
big piece of that planning relates to the
financial strategy. Even if the CEO thinks
two or three steps ahead, the reality
he or she responds to will be different
from the plan. By thinking through
multiple scenarios over several years,
the CEO has a better grasp of how much
capital will be required to reach the next
value-creating milestone.
Often a CEO has to decide whether its
better to raise more money now or later.
In flush times, raising money is tempting
because its easy. Still, the CEO must

understand why she is raising the money.
Will the capital allow the company to
pursue productive activities at a faster
pace, or is the additional money simply
more runway?
Both options are legitimate, but the CEO
should be able to articulate why she is
raising that specific amount of money
and how it fits in with the companys
overall capital strategy, particularly
alongside business development and
grant activities.
There is nothing about raising capital
that happens with the snap of the fingers.
Theres a long tail. At one of my previous
companies, we raised a Series C financing
in about four weeks, but that was only
possible because we spent two years
laying the groundwork to make it happen.
I dont fall into the camp that believes
CEOs should automatically raise additional
capital during boom times to secure
a longer financial runway. It is more

nuanced. Lets recognize that there is
no such thing as non-dilutive capital.
Business development is differently
dilutive from equity, but its still dilutive.
Therefore, if you take the wrong amount
of capital whether that is too much or
too little you potentially buy yourself a
problem down the line. A CEO needs to
think hard about the price at which he or
she will raise the equity relative to the
progress the company plans to make.
When it comes to fundraising, having
not one backup plan but multiple backup
plans is essential. You can create your
ideal plan, but then you need to find
out if it is possible in the real world.
The marketplace will tell you whether
the environment favors equity raises
or business development. With multiple
contingency plans in place, you are
able to adjust and continue to build the
companys value within the context of
what the real world is interested in doing.
Im always planning two or three financing steps

ahead, identifying how to tap diverse pools of
capital for my companys needs.
11
The year in review
External perspective
The European biotechs

strategic decision: list
in Europe or the US?
Jrn Aldag
CEO, uniQure
Last year, approximately 12 European companies listed on the NASDAQ, while 19 biotechs listed on European
exchanges. That near parity suggests European companies now have broader access to the capital markets and
are not limited to listing on their in-country exchanges.
This is welcome news. But it also means
European biotechs have an important
strategic decision to make: should they
pursue a US listing or are there more
advantages to listing on an exchange
closer to home?
As both a board member and a CEO, I
have faced this choice. Regardless of
which option a European biotech company
chooses, it must thoroughly prepare for
the event. In the past, some European
biotechs have underestimated their IPO
readiness and the scrutiny that comes
with being a public company.
I believe it is possible for a European
biotech to list in Europe and assemble
a strong and loyal investor base that
provides the liquidity necessary for future
growth. Let me give you an example.
I am a board member of Molecular
Partners, a Zurich-based biotech that
listed on the Swiss SIX exchange in
December 2014. We were fortunate to
have good-quality, long-term investors
who want to be associated with Molecular
Partners and dig deep into its story. Our
listing was facilitated by what I call a local
12
hero image. Because investors looked

at Molecular Partners and its DARPin
technology as a home-grown product of
Switzerland and its universities, there was
traction and excitement about the listing.
In the case of Molecular Partners, seeking
a listing on the US markets wasnt a
strategic necessity. Depending on their
specific scientific and clinical stories,
other companies may find the US markets,
and their more sophisticated investor
base, a more suitable option.
European biotechs that do choose to list
in the US should not underestimate the
effort required to build name recognition,
however. Because they are not as wellknown as US private companies, the
management teams of European biotechs
must take pains to communicate their
stories clearly.
European platform biotech companies
may also have a harder time telling
their stories, since US investors tend to
view product-centric business models
as the path to value creation. Mastering
the switch from platform to product,
as Molecular Partners and my current
company uniQure have done, is therefore

essential if you are a European biotech
seeking a US listing.
UniQure, which was founded in 1998
(originally operating as Amsterdam
Molecular Therapeutics), is a gene therapy
company. Our lead product is Glybera,
approved in Europe for a rare genetic
disorder in which fat builds up in the
blood. We decided in the second half of
2013 that we wanted to list on the US
market, partly because of the access it
gave us to mature capital markets and the
robust, specialist investor community. We
completed our IPO in February 2014.
Forging ties
To build awareness for uniQure, I spent
seven weeks telling, and refining, our
story to US investors as part of the preIPO road show. In the process, we were
able to take advantage of how interwoven
the biotech and financial industries are in
the US as compared to Europe.
In the US, successful IPOs follow a
well-established path. As ideas emerge
from academia, companies are founded
The year in review
by highly regarded scientists on solid,

innovative technologies. Venture
capitalists bring in entrepreneurs who
can lead the nascent firm through funding
rounds, while building relationships with
crossover investors.
The US is the epicenter of the capital

markets. In order to access the wealth and
knowledge that are in such abundance in
the US, European biotechs will need to
educate themselves about the IPO process

and its stakeholders, and about how
they can best present their companies in
order to succeed.
The collective goal is to bring the company

to a particular value inflection point
that enables a robust mezzanine round
just prior to a public listing. By creating
direct ties with crossover investors,
the management team and its VCs lay
the groundwork for a successful IPO,
underpinned by a solid investor base.
This emphasis on forging ties with
crossover investors is less prevalent in
Europe, where biotechs are generally more
nave about the work and timelines required
for a successful IPO. When European
companies seeking a US listing are focused
on crossover investors, they may find that
they are viewed as an unknown entity.
Also, many European VCs believe that
dilution is to be avoided at all costs. But in
todays environment, it is critical to have
investment support from financiers that
understand the business after the IPO.
I dont mean to suggest that my company
has not benefited immeasurably from
European VCs. In todays world, however,
companies may have to accept dilution
in order to create a strong shareholder
base. Those are the table stakes when
preparing for an IPO.
I have had the benefit of spending a
lot of time in the US I know people in
the investor and pharma worlds, and I
understand the process of going public.
13
Section heading
Financial
performance
Beyond borders 2015
Financial
performance
14
Setting a new standard
The big picture

For the second year in a row, the biotechnology industry celebrated a standout performance, posting
revenue, R&D and net income results that strongly outpaced 2013. Results varied markedly by geography
across the four established biotechnology centers we track the US, Europe, Canada and Australia. In
contrast to 2013, when a select few US biotech bellwethers propelled the bulk of the industrys advances, a
wider spectrum of companies in both the US and Europe contributed to the healthy gains.
In particular, a group of newly minted US
commercial leaders, defined as biotech
companies with revenues of at least
US$500 million, illustrated that years of
hard work in the laboratory and the clinic
are being rewarded in the marketplace.
Revenues in 2014 grew 24% year over year,
eclipsing the robust 2013 performance
when top-line growth expanded by 10%.
Admittedly, much of the expansion was
driven by Gilead Sciences, which generated
US$24.9 billion of the total revenue as a
result of strong sales of its two hepatitis C
therapies, Sovaldi and Harvoni. Even after
adjusting for the Gilead effect, however,
the industry would have grown its top line
in 2014 by 12%.
Solid revenue numbers in 2014, coupled
with the years unprecedented M&A and
financing environments, fueled a return
to innovation as the surest path to longterm value creation. This linkage between
R&D and long-term value creation fueled
strong R&D spending for the second year
in a row and one of the greatest annual
increases in this metric since 2001.
Recall that in the aftermath of the financial
crisis, biotech companies were hesitant to
invest in R&D. In 2008, for the first time
in the industrys history, R&D spending
Growth in established biotechnology centers, 201314

(US$b)
2014
2013
% change
Public company data

Revenues
24%
123.1
99.0
R&D expense
35.4
29.4
20%
Net income
14.9
4.5
231%
1,063.4
794.8
34%
Number of employees
183,610
168,010
9%
714
619
15%
Number of companies
Public companies
Source: EY, Capital IQ and company financial statement data.
actually declined as companies slashed

costs and focused on surviving in a
resource-constrained environment. While
R&D growth inched upward from 2009 to
2012, it continued to trail top-line growth
during those years. In 2013, the cycle
reversed and growth in R&D spending
actually exceeded revenue growth by a
healthy four percentage points.
In 2014, biotech companies spent
US$35.4 billion on R&D. Although growth
in R&D spending didnt quite equal topline growth, that would have been a hard
bar to clear given the unprecedented
annual increase in biotech revenues in

2014. Importantly, the 20% uptick in
R&D spending substantially outpaced
the 12% revenue growth associated with
the industry after adjusting for Gileads
historic product launches.
R&D spending in 2014 increased in both
the US (22%) and Europe (14%) and
was driven by both the noncommercial
leaders and the industrys biggest players.
Indeed, on both sides of the Atlantic,
noncommercial leaders actually expanded
their R&D spending faster than the
commercial leader segment. This renewed
15
commitment to R&D was driven by

the years unprecedented financing
environment. (See accompanying
Financing, 2014 article.)
the aggregate net income in established

markets into the black for the first time
ever not just in the US, but globally.
Profitability for all

the right reasons
We first developed a profitability forecast
for the biotechnology industry in 2003,
when we predicted that the US industry
would reach aggregate profitability by
2008. That forecast was borne out when,
in 2008, the US industry eked out a small
profit of US$0.4 billion.
Profitability arrived in a big way in 2009,
but not for the reasons we anticipated.
In the wake of the global financial crisis,
biotech companies around the globe
took extreme measures to reduce their
cash burn by cutting headcount and
R&D. That emphasis on fiscal discipline
in an uncertain financing market moved
In 2014, net income reached a historic

high, ballooning 231% to US$14.9 billion.
Much of that net income increase (82%)
came courtesy of Gilead. Adjusting for
Gileads performance, global net income
in 2014 doubled, with positive increases in
three of the four biotechnology clusters:
the US, Europe and Australia. In contrast
to 2009-12, the uptick in aggregate
net income in 2014 was for all the right
reasons: strong sales of newly launched
products resulted in even stronger
increases in profits.
Consistent with the healthier net income
data are new figures from the EY Survival
Index, which tracks the amount of
cash biotech companies have on hand.
In the US, the picture in 2014 largely
remained the same as in the year prior.
In Europe, however, the number of biotech
companies in each of the categories

expanded, except those with less than one
year of cash on the books, where there
was an 11 percentage point drop. Those
data suggest the healthier climate that has
existed in the US may finally be spreading
to companies domiciled in Europe.
The number of public companies surged
15% in 2014, due to a record 94 IPOs,
which offset the attrition resulting
from acquisitions, delistings and other
developments. The US and European
totals grew by 58 and 32, respectively,
while Canada added three companies and
Australia added one.
In 2014, the strengthening US dollar
negatively affected global pharmaceutical
companies. Interestingly, an analysis of
the top 10 biotech companies by revenue
in both the US and Europe suggests
the impact of currency fluctuations
was negligible, reducing US revenues
by US$281 million (a loss of 0.3%) and
EY Survival Index, 201314

US
Europe
Canada
2014
2013
2014
2013
2014
2013
More than 5 years of cash
27%
26%
34%
32%
22%
24%
35 years of cash
12%
15%
11%
8%
8%
7%
23 years of cash
17%
12%
13%
10%
7%
5%
12 years of cash
22%
24%
16%
15%
25%
5%
Less than 1 year of cash
21%
23%
25%
36%
38%
59%
Chart shows percentage of biotech companies with each level of cash. Numbers may appear inconsistent because of rounding.
16
Revenues generated by US and European biotechnology commercial leaders fuel investor sentiment
US commercial leaders
EU commercial leaders
Other US public companies
Other EU public companies
Number of commercial leaders
140
30
120
Revenues (US$b)
100
20
80
15
60
10
40
5
20
Number of commercial leaders
25
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Commercial leaders are companies with revenues of at least US$500 million.

increasing the European top line by

US$26 million. This lack of effect was
most likely due to the fact that sales of
biotechnology products were more heavily
concentrated in the US.
These robust results helped sustain
investor sentiment throughout the year
and increased year-over-year market
capitalizations, fueling prolonged interest
in new company listings and the creation
of a burgeoning class of pre-commercial
biotech companies valued north of
US$1 billion. Indeed, for the first time
ever, the global biotech industry eclipsed
another important threshold: the industrys
total market cap exceeded US$1 trillion.
The uptick in aggregate net income

in 2014 was for all the right reasons:
strong sales of newly launched
products resulted in even stronger
increases in profits.
17
A maturing industry
Top 10 changes in US market capitalizations, 200914

(US$m)
Company
Gilead Sciences
Market cap at
end of 2014
Market cap at
end of 2009
US$ change
CAGR
(200914)
$142,207
$38,940
$103,267
30%
Biogen
$80,163
$15,472
$64,691
39%
Amgen
$121,167
$57,257
$63,910
16%
Celgene
$89,343
$25,591
$63,752
28%
Regeneron Pharmaceuticals
$41,471
$1,946
$39,525
84%
Alexion Pharmaceuticals
$36,689
$4,324
$32,365
53%
Illumina
$26,210
$3,838
$22,373
47%
Vertex Pharmaceuticals
$28,574
$8,244
$20,330
28%
BioMarin Pharmaceutical
$13,331
$1,895
$11,436
48%
Incyte Corporation
$12,351
$1,080
$11,271
63%
CAGR: compound annual growth rate. Numbers may appear inconsistent due to rounding.
Top 10 changes in European market capitalizations, 200914

(US$m)
Company
Shire
Jazz Pharmaceuticals
Alkermes
Market cap at
end of 2014
Market cap at
end of 2009
US$ change
CAGR
(200914)
$41,681
$10,581
$31,099
32%
$9,904
$244
$9,660
110%
$8,563
$892
$7,672
57%
Novozymes
$13,014
$6,448
$6,565
15%
Actelion
$12,915
$6,367
$6,549
15%
BTG
$4,720
$721
$3,999
46%
Eurofins Scientific
$3,876
$777
$3,099
38%
Genmab
$3,336
$709
$2,627
36%
Meda
$5,255
$2,726
$2,529
14%
Swedish Orphan Biovitrum
$2,704
$196
$2,508
69%
CAGR: compound annual growth rate. Numbers may appear inconsistent due to rounding.
18
Since much of the years strong

performance came on the back of a
booming stock market and a surge in
IPOs, we decided to measure just how
much the industry has matured since the
last big IPO bonanza of 2000:
Total revenues for US and European
biotechs increased an impressive
610% over the past 14 years.
Adjusting for inflation, the revenues
generated by the top 10 biotechs
in 2014 were 4.6 times greater
than the revenues generated
by the top 10 in 2000.
Despite several notable acquisitions,
the number of commercial leaders in
the US expanded from seven in 2000
to 19 in 2014, with average revenue
per commercial leader increasing from
US$1.6 billion to US$4.3 billion.
The cohort of European commercial
leaders increased from two in 2000
to nine in 2014, and the average
revenue per commercial leader shot
up US$1.2 billion to US$2.2 billion.
A side-by-side comparison of the top 10
US and European biotechs by revenues in
2000 relative to 2014 is a good reminder
of how much churn lies beneath the
aggregate statistics in this industry:
Only three of the top 10 US-based
biotechs of 2000 (Amgen, Bio-Rad
and IDEXX) remain in 2014s top 10.
Of the seven that exited the US

top 10 list, six were acquired in
megadeals worth at least US$10
billion, while one shrank in revenue.
In Europe, four of the top 10 revenue
generators from 2000 Shire,
Eurofins, Qiagen and BTG still
belong to the group in 2014.
Two of the remaining six European
biotechs Jazz Pharmaceuticals and
Alkermes are originally US-based
companies that redomiciled to
Ireland via acquisitions.
Biotech Index by 162 percentage points.

Pharmacyclics market cap grew 126%
to US$9.2 billion as a result of a full year
of product sales for its leukemia product
Imbruvica. In 2015, AbbVie acquired the
biotech for US$21 billion. NPS has also
been acquired: in January 2015, Shire
acquired the rare disease drug developer
for US$5.2 billion.
The strengthening public markets,

coupled with increasing competition
for commercial-stage assets, has made
for a sellers market. With big pharma
companies on the hunt for future revenue
growth, in 2014 they were forced to
pay hefty acquisition premiums relative
to what they would have paid just two
years ago. (For more, see accompanying
Deals, 2014 article.)
A rising tide lifts

all biotechs
Both industry leaders and emerging
companies earned phenomenal returns in
recent years and the pool of companies
with market valuations north of
US$500 million swelled from 80 in 2009
to 144 in 2014. During this same period,
the 20 US biotech companies with the
biggest market cap increases saw their
valuations surge by US$488 billion.
Our analysis shows that since 2009, three
of the fastest-growing companies have
been newly minted commercial leaders:
Pharmacyclics, NPS Pharmaceuticals and
Regeneron Pharmaceuticals. Indeed, an
analysis of the market cap data shows that
US biotech companies with valuations in
the US$2 billion-US$10 billion range grew
the fastest in 2014, outstripping the EY
19
United States
US biotechnology at a glance, 201314

(US$b)
2014
2013
% change
Public company data

29%
Revenues
93.1
72.1
R&D expense
28.8
23.6
22%
Net income
10.6
2.7
293%
Number of employees
853.9
636.5
34%
110,090
99,850
10%
Financing
37.8
20.0
89%
Number of IPOs
63
41
54%
Capital raised by private companies
7.3
5.7
28%
17%
Capital raised by public companies
Number of companies
403
345
Private companies
Public companies
2,116
2,010
5%
Public and private companies
2,519
2,355
7%

In 2014, the US biotech industrys revenue

growth skyrocketed 29%, one of the
best showings since we began tracking
the metric and far exceeding the 13%
revenue growth of 2013. While 67% of
the companies we track had revenue, the
annual data were heavily influenced by the
performance of just one, Gilead Sciences.
As a result of strong sales of Sovaldi and
Harvoni, Gileads 2014 revenues more
than doubled. In all, sales of these two
products accounted for 60% of 2014s
US$21.0 billion revenue increase.
Adjusting for Gileads results, the
US industrys revenues would have
increased by 12% instead of 29%. In
addition, the 2014 IPO class contributed
about one percentage point to revenue
growth, meaning that the industrys
revenue growth would have been 11%
20
after adjusting for both Gilead and

the unusually large number of IPOs.
Conversely, Thermo Fisher Scientifics
acquisition of Life Technologies, which
had revenues of US$3.8 billion in 2013,
removed seven percentage points of
revenue growth. The year-over-year
revenue growth normalized for all three
factors is therefore an impressive 18%.
In addition to Gilead, three other
biotech stalwarts delivered revenue
increases greater than US$1 billion:
Biogen (US$2.8 billion), Amgen (US$1.4
billion) and Celgene (US$1.2 billion).
Tecfidera, Biogens oral agent to treat
multiple sclerosis, reached blockbuster
status in less than 12 months, helping
propel Biogens yearly revenues up 40%.
Regeneron, another biotech with notable
2014 revenue growth (34%), grew as a
result of both R&D collaborations and

strong sales of Eylea, a next-generation
anti-angiogenesis therapy for diseases
that can cause blindness.
Strong revenue and product stories
helped power a 34% increase in market
capitalization in 2014, and 58% of
companies saw their valuations increase
year over year. This healthy spike in
market valuations didnt quite equal the
74% increase observed in 2013. However,
given how rapidly valuations climbed
in 2013, a similar growth rate in 2014
was likely unrealistic. Normalizing for
the years IPOs, market cap would have
increased by 29% instead of 34%.
Investing in the future

The increase in market capitalization
drove a spike in the number of precommercial-stage companies with market
valuations greater than US$1 billion.
As of 31 December 2014, 26 companies
reached this threshold, led by Alnylam
Pharmaceuticals (US$7.5 billion), Puma
Biotechnology (US$5.7 billion) and Juno
Therapeutics (US$4.7 billion).
Compare those data to 2007, when
there were just three pre-commercial
billion-dollar companies and Vertex
Pharmaceuticals, Regeneron
Pharmaceuticals and Human Genome
Sciences were at the top of the leader
board. In a sign of how much the improved
financing climate has changed the US
biotechnology industry, 60% of this subset
of companies completed an IPO in either
2013 or 2014.
US precommercial companies with market cap >US$1b

Company
Market cap (US$m)
Lead
product status
Therapeutic
area
Alnylam Pharmaceuticals
$7,462
Phase III
Multiple
Puma Biotechnology
$5,706
Phase III
Cancer
Juno Therapeutics*
$4,722
Phase I/II
Cancer
Agios Pharmaceuticals*
$4,104
Phase II
Cancer
Receptos*
$3,793
Phase III
Multiple
Intercept Pharmaceuticals
$3,332
Phase III
Hepatic
Acadia Pharmaceuticals
$3,168
Phase III
Multiple
bluebird bio*
$2,876
Phase III
Genetic
Kite Pharma*
$2,413
Phase II
Cancer
Clovis Oncology
$1,904
Phase III
Cancer
FibroGen*
$1,582
Phase III
Multiple
Neurocine Biosciences
$1,698
Registration
Multiple
Ophthotech*
$1,510
Phase III
Ophthalmic
Chimerix*
$1,468
Phase III
Infection
Auspex Pharmaceuticals*
$1,448
Phase III
Neurology
Ultragenyx Pharmaceutical*
$1,400
Phase III
Multiple
Radius Health*
$1,281
Phase III
Musculoskeletal
Acceleron Pharma*
$1,257
Phase II/III
Cancer
Achillion Pharmaceuticals
$1,228
Phase II
Infection
Karyopharm Therapeutics*
$1,224
Phase II
Cancer
TetraPhase Pharmaceuticals*
$1,217
Phase III
Infection
Avalanche Biotechnologies*
$1,213
Phase II
Ophthalmic
Merrimack Pharmaceuticals
$1,196
Phase III
Cancer
NewLink Genetics
$1,111
Phase III
Cancer
OvaScience
$1,052
Development
Womens Health
Sangamo BioSciences
$1,040
Phase II
Multiple
*Company had an IPO in 2013 or 2014.

Market capitalizations as of 31 December 2014.
21
As a result of stronger market valuations

and material gains in revenue growth, US
biotech companies were clearly optimistic
about investing in future products, and
overall R&D expenditures grew by 22%
relative to 2013. Nearly 70% of US biotech
companies increased their R&D spending
in 2014 slightly above the historical
average of about two-thirds of companies.
Overall, US commercial leaders increased
their R&D spending by 18%, including
Alexion Pharmaceuticals (62%) and
Regeneron Pharmaceuticals (48%).
In contrast, Amgen, which in 2014 had
the largest R&D budget in the global
biotechnology industry, increased its
R&D spending by just 3%. Amgens more
modest increase isnt too surprising given
the company has come under pressure
from activist shareholders seeking
higher returns from R&D.
Along with the uptick in R&D spending,

a majority of US biotech companies
were confident enough of their financial
health to boost headcount in 2014.
Employee numbers increased 10%, as
80% of US commercial leaders and other
firms maintained or increased their
payrolls compared to 2013. One notable
exception was Amgen, which reduced
headcount by 10.5% as part of a larger
restructuring effort.
Normalizing for the large number of IPOs
in 2014, R&D growth would have been
15% instead of 22%. Note that this spend
still outpaces the top-line growth after
adjusting for Gileads revenues, albeit by
a much smaller margin. Most significantly,
net income would have grown at an even
faster pace, by more than 360%.
Cubist Pharmaceuticals, which Merck

& Co. announced it was acquiring in
December 2014 (the transaction closed
in January 2015), and Pharmacyclics and
Salix Pharmaceuticals, which were sold
in March 2015 to AbbVie and Valeant
Pharmaceuticals, respectively.
Roughly 70% of the US biotech sectors
total revenues came from the top five
commercial leaders: Gilead Sciences,
Amgen, Biogen, Celgene and Regeneron.
As mentioned, Gileads strong
performance in 2014 had a material effect
on the overall financial performance of the
US biotech sector. Gilead also passed the
US$20 billion revenue mark for the first
time and displaced Amgen as the sectors
top revenue generator.
Just as revenue growth was heavily

influenced by Gilead, so too was net
income, increasing nearly 300% from
2013 to 2014. Absent Gilead, the
aggregate net loss of US public biotechs
increased US$700 million. The higher
losses were due primarily to greater R&D
expenditures, including by newly public
companies, offset in part by increased
earnings by other commercial leaders.
Strong product sales helped push

Pharmacyclics (Imbruvica), Medivation
(Xtandi) and Incyte (Jakafi) into the realm
of the US commercial leaders in 2014.
The US commercial leaders remain a
dynamic group of companies, primarily
because several trends make acquisition
targets of many of these high-performing
biotechs. (See accompanying article,
Year in review.)
In light of these findings, it isnt surprising

that the bulk of the industrys growth
went to the commercial leaders. The
distribution was even more skewed this
year, thanks to Gileads outsized results.
However, noncommercial leaders fared
well too, particularly after normalizing
the results of the commercial leaders to
control for the Gilead effect. Adjusting
for Gileads results, the revenue growth
of the noncommercial leaders would have
outpaced the commercial leaders by two
percentage points.
Indeed, because of the aforementioned

increase in R&D expenditures, only 13%
of the US biotechs recorded a positive
bottom line. Another 183 publicly
disclosed a drop in net income (or an
increase in net loss) for the year.
Indeed, 2014 saw the loss of one

commercial leader as a result of an
acquisition when Life Technologies
was scooped up by Thermo Fisher
Scientific. Three other companies are
poised to leave the group in 2015:
Similarly, the noncommercial leaders

increased their R&D spending by 29%,
while the commercial leaders augmented
their research budgets by only 18%.
To some extent, the latter phenomenon
was driven by a slowdown in the growth
22
New commercial leaders
US commercial leaders, 201014

2010
2011
2012
2013
2014
Alexion
Alexion
Alexion
Alexion
Alexion
Amgen
Amgen
Amgen
Amgen
Amgen
Amylin
Amylin
Acquired by BMS
Biogen
Biogen
Biogen
Biogen
Biogen
Biomarin Pharmaceutical
Bio-Rad Laboratories
Celgene
Celgene
Celgene
Celgene
Celgene
Cephalon
Acquired by Teva
Cubist
Cubist*
Organic growth
Cubist
Cubist
Cubist
Gen-Probe
Gen-Probe
Acquired by Hologic
Genzyme
Acquired by Sanofi
Gilead Sciences
Gilead Sciences
Gilead Sciences
Gilead Sciences
Gilead Sciences
IDEXX Laboratories
IDEXX Laboratories
IDEXX Laboratories
IDEXX Laboratories
IDEXX Laboratories
Illumina
Illumina
Illumina
Illumina
Illumina
Organic growth
Life Technologies
Life Technologies
Life Technologies
Life Technologies
Organic growth
Organic growth
Myriad Genetics
Organic growth
Organic growth
Organic growth
Salix Pharmaceuticals
Talecris Biotherapeutics
Acquired by Grifols
United Therapeutics
United Therapeutics
Organic growth
Incyte Corporation
Acquired by Thermo Fisher
Scientific
Medivation
Myriad Genetics
Pharmacyclics
The Medicines Company
United Therapeutics
United Therapeutics
United Therapeutics
Organic growth
Organic growth
ViroPharma
Decline in sales

*Merck & Co. announced the acquisition of Cubist in December 2014; the deal was finalized in January 2015.
23
of Amgens R&D spending. In addition,

the noncommercial leaders in 2014
grew at a much faster pace; their
increased confidence and flush coffers
resulted in their renewed focus on R&D
more generally.
Investors saw opportunities in US

biotech companies regardless of their
size, sending the market capitalizations
of the commercial leaders up 36% and
the noncommercial leaders 28%. These
increases were much lower than the year
prior, when the market capitalizations
of the commercial leaders and the other
companies increased 74% and 77%,
respectively. Concerns related to drug
pricing and already-high valuations were
two reasons for the more modest uptick.
When it came to profitability, however,

there was a stark divide between
the commercial leaders and other
companies. While the net income of
commercial leaders rose 82%, the
rest of the industry saw its net income
decline 26% as the result of increased
R&D spending and the cohort of new
companies added via IPOs.
Newly public companies contributed

US$32.3 billion to the market
valuation increase associated with the
noncommercial leaders. Normalizing

for the IPO class of 2014, the
noncommercial leaders experienced
an increase in market cap of just 9%.
The IPO class also had an impact on
other variables. Without the years IPOs,
noncommercial leaders revenues would
have increased by only 7%, while the
annual growth in R&D expenditures would
have been a much smaller 8%. The change
in net loss for the noncommercial leaders
would also have been much smaller
just US$200 million, an increase of 2%
instead of 26%.
US commercial leaders and other companies, 201314

(US$b)
2014
2013
US$ change
% change
Commercial leaders
Revenues
19.4
31%
81.3
61.8
R&D expense
17.2
14.6
2.6
18%
Net income (loss)
23.4
12.9
10.6
82%
644.5
473.3
171.2
36%
Number of employees
71,540
65,785
5,755
9%
Revenues
11.8
10.3
1.5
14%
R&D expense
11.6
9.0
2.6
29%
Other companies
Net income (loss)
(12.8)
(10.1)
(2.7)
-26%
209.4
163.3
46.1
28%
38,568
34,094
4,474
13%
Number of employees
Numbers may appear inconsistent because of rounding. Commercial leaders

are companies with revenues of at least US$500 million.
24
Investors saw
opportunities in US
biotech companies
regardless of their size.
Selected US public company financial highlights by geographic area, 2014

(US$m, % change over 2013)
Total assets
Cash and
equivalents
plus
short-term
investments
San Francisco Bay Area
80
19%
210,781
24%
32,610
95%
6,883
34%
9,477
4,335%
53,582
41%
20,238
100%
New England
75
29%
209,554
42%
16,517
27%
6,487
24%
75
-112%
36,129
27%
13,711
34%
San Diego
44
13%
60,027
31%
2,870
-53%
1,677
11%
(918)
107%
9,057
-40%
6,040
42%
New York State
34
17%
53,320
56%
3,706
31%
1,863
52%
(913)
780%
7,322
45%
2,659
42%
New Jersey
25
9%
100,907
27%
8,971
20%
2,973
10%
1,353
25%
21,534
31%
9,745
38%
Mid-Atlantic
20
5%
16,026
19%
2,277
32%
808
9%
(8)
-91%
4,885
12%
2,111
14%
Southeast
19
6%
6,909
30%
335
26%
239
15%
(404)
17%
2,064
13%
644
29%
Los Angeles/Orange County
19
19%
134,530
45%
20,335
7%
4,965
6%
4,438
-3%
70,514
5%
28,170
41%
Pacific Northwest
16
33%
12,683
78%
537
-19%
858
62%
(852)
23%
2,061
53%
1,287
49%
Pennsylvania/Delaware Valley
12
20%
15,322
13%
899
-25%
575
15%
(520)
38%
2,448
-25%
1,059
-6%
North Carolina
13
18%
11,775
47%
1,247
31%
489
47%
(804)
397%
5,135
45%
1,377
-17%
12
0%
3,928
49%
67
-40%
193
-2%
(306)
-28%
773
-3%
631
26%
Texas
9
29%
3,352
38%
254
-2%
237
36%
(299)
177%
1,257
71%
833
137%
Colorado
7
17%
2,809
-7%
62
-11%
226
51%
(311)
69%
1,043
24%
685
45%
Utah
4
0%
2,793
39%
778
27%
85
38%
151
24%
867
1%
228
-46%
Other
14
0%
9,145
16%
1,585
38%
273
34%
458
64%
3,425
42%
1,438
59%
Total
403
17%
853,862
34%
93,050
29%
28,831
22%
10,618
293%
222,095
17%
90,857
46%
Region
Number
of public
companies
Midwest
Market
capitalization
Revenue
R&D
Net income
(loss)
Market capitalization as of 31 December 2014. Percent changes refer to change over December 2013. Numbers may appear inconsistent because of rounding.
New England: Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, Vermont; Mid-Atlantic: Maryland, Virginia, District of Columbia; Mid-West: Illinois,
Michigan, Ohio, Wisconsin; Southeast: Alabama, Florida, Georgia, Kentucky, Louisiana, Tennessee, South Carolina; Pacific Northwest: Oregon, Washington
25
In both the US and Europe, biotech stocks outperformed the broader indices,
led by mid-sized biotechs in the US and large firms in Europe.
US market capitalization relative to leading indices
EY US biotech industry
+200%
Dow Jones Industrial Average
Pharma industry US
2013
Russell 3000
NASDAQ Composite
2014
EY US medtech industry
2015
+150%
+100%
+50%
0%
-50%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar
Chart includes companies that were active on 31 March 2015.
US market capitalization by company size

EY US biotech industry
+400%
Large-cap (>US$10b)
Mid-cap (US$2bUS$10b)
2013
Small-cap (US$200mUS$2b)
2014
Micro-cap (<US$200m)
2015
+350%
+300%
+250%
+200%
+150%
+100%
+50%
0%
-50%
26
European market capitalization relative to leading indices

EY European biotech industry
+150%
CAC-40
DAX
FTSE 100
Pharma industry EU
2013
EY EU medtech industry
2014
2015
+100%
+50%
0%
-50%
European market capitalization by company size

EY European biotech industry
+200%
Large-cap (>US$10b)
Mid-cap (US$2bUS$10b)
2013
Small-cap (US$200mUS$2b)
2014
Micro-cap (<US$200m)
2015
+150%
+100%
+50%
0%
-50%
27
Europe
European biotechnology at a glance, 201314

(US$m)
2014
2013
% change
Public company data

Revenues
R&D expense
23,992
20,915
15%
5,576
4,910
14%
3,255
1,087
199%
162,149
114,699
41%
Number of employees
58,770
54,440
8%
7,182
4,384
64%
31
288%
2,068
1,569
32%
Net income (loss)
Financing
Capital raised by public companies
Number of IPOs
Capital raised by private companies
Number of companies
196
164
20%
Private companies
1,940
1,987
-2%
2,136
2,151
-1%
Public companies

In 2014, the European trend lines followed

those in the US, albeit the trajectories for
each of the key performance metrics did
not reach the same heights.
European biotech companies saw their
revenue growth rebound strongly in 2014,
as top-line sales expanded 15%, compared
to the modest 3% uptick of 2013. In a
sign of a healthier financial picture, 77%
of European biotechs generated some
revenue and 69% increased their top
lines year over year. Those results are
comparable to the revenue metrics posted
by US biotech companies.
Shire solidified its standing as the
leading European biotech, posting the
years largest revenue increase (roughly
US$1.1 billion). Shires revenues were
28
definitely bolstered by its acquisition

of ViroPharma and that companys
hereditary angioedema product, Cinryze.
In addition to Shire, Jazz Pharmaceuticals,
which relocated to Ireland in 2012, saw
strong revenue growth in 2014, thanks
to solid sales for its excessive daytime
sleepiness product Xyrem.
R&D spending by European biotechs
increased 14% in 2014, reaching
US$5.6 billion. That increase is a sharp
contrast to 2013, when R&D spending
actually declined 4%. Fifty-seven percent
of Europes biotechs increased their
R&D expenditures in 2014, suggesting
management teams were feeling more
confident about their access to capital
and therefore more willing to invest
in future innovations. While that is a
healthy sign, it is still substantially below

the 70% of US biotechs that upped their
R&D expenditures in 2014. Alkermes
and Jazz contributed the most to the
growth in R&D spending, allocating
more than US$200 million combined to
pipeline development. Other European
stalwarts, however, pulled back from R&D
investments in 2014, including Shire,
which downsized its R&D expenditures by
6% as the result of either termination or
completion of late-stage clinical programs.
As in the US, European biotech companies
aggregate net income increased by a
healthy percentage, spiking 199% to
US$3.3 billion. This percentage increase
didnt match the steep growth rate of
2013, when net income soared by 462%.
It was also heavily influenced by the
US$1.6 billion breakup fee Shire received
from AbbVie when the proposed merger
between the two companies was called off
in October 2014.
Adjusting for this one-time event,
European biotech companies actually
added US$533 million in aggregate net
income in 2014, an annual increase of
52%. This increase was driven largely by
strong performances by Medivir, Actelion
and Amarin, which each increased their
net income by at least US$90 million.
Indeed, only 45% of European biotechs
boosted their net income in 2014,
compared to 50% in 2013. Among those
with sizeable drops in net income were
Meda and Jazz Pharmaceuticals, while
Alkermes reported a net loss. Medas
net income fell as a result of one-time

restructuring charges related to its
Rottapharm acquisition, while the bottom
lines of both Jazz and Alkermes were
affected by the aforementioned increases
in their R&D budgets.
A brightening climate
The market capitalizations of European

biotech companies increased strongly
for the second straight year amid
positive investor sentiment. Indeed,
market caps of European companies
actually increased seven percentage
points more than those in the US in
2014. A catch-up phenomenon was
at least partly responsible, given that
European biotech market valuations
didnt increase as dramatically in 2013
as those of US biotechs, there was more
room for a run-up in 2014. In all, 59% of
European biotechs saw their market caps
increase in 2014.
2014 was another solid year for European

commercial leaders, which reported
greater growth across all the key
performance indicators we track.
Another welcome change from past

years was the uptick in IPOs. In 2014, 31
European biotech companies debuted on
public exchanges (including exchanges
located in the US). As a result, the number
of European public biotech companies
swelled 20%. These new listings had a
slight effect on Europes overall financial
performance, contributing 1% to the
continents revenue growth and 39%
to the upsurge in R&D expenditures.
Normalizing for the 2014 IPO class,
aggregate net income for European
biotechs would have increased by 232%
instead of 199%, since many of these IPO
companies were in net loss positions, as is
normal for newly public companies.
A subsector analysis of the European

biotech sector provides additional data
suggesting a brightening climate for
biotechs in that part of the world.
There were no changes to the list of

European commercial leaders from 2013
to 2014, as Shire remained independent
after AbbVie called off its proposed
acquisition of Europes largest biotech.
This stability is welcome news. Anchored
by a strong group of rapidly growing
commercial-stage companies, it will be
easier for the European biotech sector to
sustain positive investor sentiment.
In 2014, all nine European commercial
leaders increased their revenues year
over year, including five by double digits.
Indeed, the European commercial leaders
were responsible for 77% of the annual
revenue growth in 2014.
More importantly, the financial
performance of Europes noncommercial
leaders surged in 2014, keeping pace
with
and in terms of revenue and R&D,
surpassing
the commercial leaders.
29
EU commercial leaders, 201014

2010
2011
2012
2013
2014
Actelion
Actelion
Actelion
Actelion
Elan Corporation
Elan Corporation
Elan Corporation
Acquired by Perrigo
Eurofins Scientific
Eurofins Scientific
Ipsen
Ipsen
Organic growth and relocation from US to Ireland

Eurofins Scientific
Organic growth and relocation from US to Ireland
Actelion
Alkermes
Alkermes
Eurofins Scientific
Eurofins Scientific
Ipsen
Ipsen
Ipsen
Meda
Meda
Meda
Meda
Meda
Novozymes
Novozymes
Novozymes
Novozymes
Novozymes
QIAGEN
QIAGEN
QIAGEN
QIAGEN
QIAGEN
Shire
Shire
Shire
Shire
Shire

Revenues at smaller European biotech

companies increased by US$717 million,
an 18% increase that was fueled by top-line
sales growth in excess of US$100 million
at both Medivir and BTG.
Noncommercial leaders also increased
their R&D expenditures by a total of
US$401 million, far surpassing the
US$256 million increase associated with
the commercial leaders. It is not unusual
to see small companies outperform larger
players on a percentage basis since they
are growing off a smaller base.
However, on an absolute dollar basis, the
growth in R&D expenditures in 2014 for
small European biotechs was a striking
turnaround from 2013, when R&D budgets
fell 9%. Nearly 68% of the annual growth
in R&D spend by Europes smaller biotech
players came courtesy of the 31 newly
public companies.
30
European commercial leaders and other companies, 201314

(US$m)
2014
2013
US$ change
% change
Commercial leaders
19,397
17,046
2,351
R&D expense
3,059
2,802
256
9%
Net income (loss)
5,016
2,278
2,738
120%
Revenues
14%
111,265
77,918
33,348
43%
Number of employees
44,757
42,147
2,610
6%
Revenues
4,605
3,888
717
18%
R&D expense
2,529
2,128
401
19%
(1,750)
(1,171)
(579)
-49%
50,931
36,850
14,081
38%
Number of employees
14,027
12,316
1,711
14%
Other companies
Net income (loss)
Numbers may appear inconsistent because of rounding. Commercial leaders

are companies with revenues of at least US$500 million.
Australia
Australian biotechnology at a glance, 201314

(US$m)
2014
2013
% change
Public company data

Revenues
9%
5,794
5,318
681
650
5%
1,066
957
11%
42,177
38,068
11%
Number of employees
13,370
12,380
8%
52
51
2%
R&D expense
Net income
Number of companies
Public companies
With the exception of its revenues,

the Australian biotech cluster grew at
a slower pace in 2014 than the year
before. R&D expenditures increased
5% in 2014, compared to 8% growth in
2013; aggregate net incomes were up
11%, compared to 25% in 2013. Market
valuations and employee headcounts
expanded 11% and 8%, respectively. In
2013, market valuations increased 15% as
Australian biotech companies bolstered
their employee base by 12%.
That said, revenues did expand 9% from
2013 to 2014 to US$5.8 billion. CSL,
Australias largest biotech company,
generated 92% of the years total
revenues and was responsible for 68% of
the sectors R&D expenditures.
Apart from acting as Australias
biotech anchor, CSL aims to bolster
its multinational presence. As such,
2014 was a building year, both in
terms of its geographic footprint and

its product portfolio. As of January
2015, both the FDA and the European
Medicines Association had approved
more flexible dosing regimens of the
companys Hizentra, to treat primary
immunodeficiency disease.The company
also announced its first major acquisition
in a decade: the purchase of Novartis
influenza vaccine business. This deal
will likely have an impact on CSLs 2016
financial performance; its management
team estimates integration costs
associated with the acquisition could be as
much as US$100 million.
Outside of CSL, the other 51 public
Australian biotech companies
reported combined 2014 revenues of
US$459 million, a year-over-year increase
of 25%. That represents the second
year in a row that Australias smaller
biotech companies have seen revenue
growth above 20%.
31
Canada
Canadian biotechnology at a glance, 201314

(US$m)
2014
2013
% change
Public company data

-58%
Revenues
260
623
R&D expense
299
310
-4%
Net income (loss)
(87)
(227)
62%
5,227
5,601
-7%
Number of employees
1,380
1,340
3%
Number of companies
Public companies
63
59
7%
Private companies
172
181
-5%
235
240
-2%

While the Canadian biotechnology industry

has continued to face challenges, one
bright spot was the years financing
data. In 2014, financing totals exceeded
US$1 billion, a threshold that hasnt been
cleared since 2007. Two IPOs contributed
US$85 million to this total.
On the flip side, Canadian biotechs
reported 2014 revenues of just
US$260 million. This contraction was
driven by numerous acquisitions and a
dearth of new public listings. The average
revenue per public company in Canada is
now US$4 million.
The reasons for this decline have been well
documented in prior issues of EYs biotech
reports. With venture funding limited,
Canadian companies have often gone
public prematurely and then struggled
to raise the subsequent rounds of capital
needed for growth. In recent years,
many of Canadas leading companies
were acquired by foreign companies,
winnowing the local sectors stable base.
32
In 2014, the acquisition of two of the largest

Canadian biotechs, Paladin Labs (by Endo
International) and Cangene (by Emergent
BioSolutions), had a pronounced impact
on the sectors financial performance.
Revenues declined 58% in 2014, compared
to a 3% increase the year prior, while R&D
expenditures sank 4%. Adjusting for these
two acquisitions, 2014 revenue would have
increased by 15%, while aggregate R&D
spending would have increased 10%. Cardiome
Pharma, one of the countrys largest
remaining public biotech, saw its revenues
grow 567% to US$30 million in 2014.
Meantime, the net loss of the Canadian sector
declined by 62% in 2014. Adjusting for the
Paladin Labs and Cangene acquisitions, the
net loss would have improved another seven
percentage points.
Driven largely by the two large acquisitions,
the sectors market capitalization fell 7% in
2014. This contrasts with 2013, when market
capitalization increased 36%, well ahead
of the 8% market cap growth in the overall
Canadian market.
Section
Financing
heading
Beyond borders 2015
Financing
33
Financing
Financing the future
The big picture

What a year. In 2014, the financing climate seemed a world away from the doom and gloom of just a few
years ago. Fundraising totals in 2014 broke all-time records in both the US and Europe, resulting in a total
of US$54.3 billion raised, a 72% increase over 2013, which itself had been a remarkably strong year.
Fundraising in 2014 handily beat capital raised in 2000 a year in which investor enthusiasm about the
sequencing of the human genome propelled fundraising to heights many thought we would never see again.
The strong 2014 performance was driven
by growth in all key funding categories:
venture capital, IPOs, follow-on equity
offerings and debt. IPOs garnered the
biggest headlines in 2014, as US and
European biotechs raised US$6.8 billion,
an astonishing 93% increase over 2013s
strong performance. Remarkably, this
was only the second-highest total in the
industrys history. IPO fundraising in 2000
had been about US$1 billion higher.
expressed new confidence in the sector.

Strong product launches by the industrys
bellwethers helped investors shake off
apprehensions regarding regulatory risks
and health care reforms. Gilead Sciences
Sovaldi became the biggest product launch
ever all the more remarkable in that it
came from a biotech company rather than
a member of big pharma. Other important
launches such as Biogens Tecfidera also
exceeded market expectations.
As in 2013, 2014s solid IPO and follow-on

financings were driven by the continuing
bull market for biotech stocks, as investors
An FDA that is more willing to balance

product access against risk, especially
in areas of high unmet need, also helped
in 2014. FDA programs designed to get

differentiated products to market via
accelerated pathways began to bear fruit,
contributing to near-record numbers of
approvals. Of the 41 approvals recorded
in 2014, more than three-quarters were
on first filings. Finally, the expansionary
monetary policies of most central banks
particularly the U.S. Federal Reserve
played a big role as investors have shown
a willingness to accept more risk in the
pursuit of returns.
Capital raised in the US and Europe, 200014

(US$m)
2000
IPOs
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
7,838
548
593
484
2,068
1,692
2,091
2,262
119
840
1,325
863
880
3,526
6,802
13,415
2,233
1,763
4,904
6,857
6,604
9,286
8,889
4,098
9,226
5,955
5,869
7,616
9,310
13,838
Debt
1,529
1,907
4,472
7,296
6,349
6,030
9,662
10,575
5,776
5,614
12,079
20,587
14,040
12,831
26,049
Venture
4,121
3,694
3,504
4,073
5,277
5,495
6,044
7,930
5,987
5,809
5,805
5,678
5,518
5,948
7,630
26,903
8,382
10,332
16,757
20,551
19,821
27,083
29,657
15,980
21,491
25,163
32,998
28,055
31,614
54,319
Follow-on
and other
Total
Numbers may appear inconsistent because of rounding. Convertible debt instruments included in debt.
Source: EY, BioCentury, Canadian Biotech News, Capital IQ and VentureSource.
34
Financing
IPO and follow-on financings have been

driven by the support of generalist
investors trying to capture some of the
sectors growth in market capitalization,
and the companies that listed in 2013 and
2014 were, on average, more mature than
new listings in prior IPO windows. Unlike
the firms that went public in the late
1990s and early 2000s, most members
of the IPO class of the last two years (81%)
had lead candidates in Phase II or later,
and the majority have retained the rights
to their products rather than out-licensing
them to a larger partner.
If the IPO market continued to garner the
headlines for biotech, an under-appreciated
yet significant development was the
growing rush of venture financing. Between
2008 and 2013, despite many doomsday
proclamations to the contrary, venture
capital had been remarkably stable.
Through the turmoil of the global financial
crisis and the subsequent recovery, venture
capital totals averaged US$5.8 billion,
never falling below US$5.5 billion or
rising above US$5.9 billion. In 2014, that
pattern was broken, as US and European
companies raised US$7.6 billion, a 28%
increase and just shy of the all-time record
of US$7.9 billion raised in 2007.
The low interest rate environment of the
last several years has led to a surge in debt
financing. That pattern continued in 2014,
as debt totals soared to US$26.0 billion,
more than double the 2003-13 average.
To control for the skewing effect of these
large debt financings, we also analyzed
equity financing totals (i.e., fundraising
Innovation capital in the US and Europe, 200014

Innovation capital
Commercial leaders
60
50
Capital raised (US$b)
A venture financing rush
40
30
20
10
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
Innovation capital is the amount of equity capital raised by companies

Source: EY, BioCentury, Canadian Biotech News, Capital IQ and VentureSource.
Between them, five large companies

closed six debt transactions of more
than US$1 billion: Amgen, Celgene,
Gilead, Ikaria and Illumina. Gileads two
offerings one in March and one in
November 2014, each for US$4 billion
were to be used to repay existing
debt and fund working capital and
share repurchases.
inspired us to create a measure we call

innovation capital the funds raised
by companies with revenues less than
US$500 million. Biotech commercial
leaders (entities with revenues in excess
of US$500 million) are self-sustaining,
cash-flow-positive entities that do not
depend on fundraising to finance R&D.
Indeed, the large debt financings of
recent years have often been used for
other purposes such as stock buybacks
and acquisitions. We have therefore been
measuring innovation capital to gauge the
situation for smaller companies that need
fundraising to sustain R&D and innovation.
Starting in 2008, the challenging funding

environment for small companies and
the spike in debt financing by large firms
What we found was telling. In the

four years before the financial crisis
struck, innovation capital had averaged
excluding debt). In 2014, these totals

reached an all-time high, as companies
raised US$28.3 billion in non-debt
capital, beating the previous high of
US$25.4 billion achieved in 2000.
35
Financing
US and European earlystage venture investment, 200014

Number of deals
2.0
200
1.6
160
1.2
120
0.8
80
0.4
40
0.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Number of deals
Capital raised
Early-stage investments include seed, first and second venture rounds.

Source: EY, BioCentury, Capital IQ and VentureSource.
US$15.1 billion a year. Between 2008 and

2012, the average fell to US$12.5 billion
a year. Even as the overall fundraising
climate recovered on the back of soaring
debt financings by commercial leaders, the
amount of innovation capital remained flat.
That changed starting in 2013,
when innovation capital shot up to
US$18.6 billion, and 2014, when it reached
a new high of US$27.6 billion. This bodes
well for investment in research pipelines
and the overall health of the sector.
In another encouraging sign for biotech
innovation, early rounds generated more
funding than they had in at least a decade
US$1.8 billion even though the number
36
of deals dropped slightly from 182 to 177,

year over year. The median deal value for
early-stage firms US$10 million was
also the highest since 2006.
Some early rounds were truly remarkable
in size. In fact, 2014 was the first year
since we began tracking the biotech sector
28 years ago in which there were four
early-stage US biotech venture rounds of
more than US$50 million. Philadelphiabased Spark Therapeutics, founded in
2013, raised US$72.8 million to pursue
gene therapies. Seattle-based Juno
Therapeutics added US$190 million to
the US$120 million it raised in December
2013 (and then followed that up with
one of the years largest IPOs) to help it
achieve its goal of developing chimeric

antigen receptor therapy (CAR-T) to help
individual patients immune-system cells
attack cancer cells. And Human Longevity,
the latest company founded by genomics
pioneer Craig Venter, raised US$70 million
to create an enormous sequencing project
aimed at finding cell-based treatments for
extending healthy human life-spans.
In addition, the years largest European
first round indeed, one of the largest
in that sectors history went to UKbased Adaptimmune, which received
US$104 million from a consortium
led by venture capital firm New
Enterprise Associates. Spun off from
the University of Oxford in 2008,
Financing
Adaptimmune is developing T-cells to treat

several types of cancer. The company also
entered into a strategic partnership with
GlaxoSmithKline in June 2014.
European early-stage companies were
more likely than their US counterparts to
benefit from this trend 36% of European
venture capital came in the form of Series A
or B funding, as opposed to 23% in the US.
A rising tide
data from Thomson Reuters) showing that

one-third of biotech firms go public within
five years of their initial investment a
higher proportion than for software or
other sectors also supports biotech
investment prospects. This is a stark
reversal from just a few years ago, when
the average time to exit had extended to
over eight years (or almost as long as the
legal life of a venture capital fund).
However, the increase in early-stage
funding was not driven by a shift in
investor focus. Instead, it was a case
of the proverbial rising tide lifting all
boats. The share of venture capital going
toward early rounds has remained fairly
static over time.
The present IPO boom has given venture

capitalists the opportunity to realize
returns and restock their coffers, the
better to support a new generation of
companies. Recent research (based on
A record-breaking 94 US and European

biotech companies went public in 2014,
raising US$6.8 billion, for an average of
US$72 million per IPO. The years 94 IPOs
thoroughly shattered the previous record
of 79 in 2000. However, the class of 2000
remained ahead in terms of the amount of
capital raised (US$7.8 billion).
However, the entire 2013-14 IPO
window in which 143 companies went
public, raising US$10.3 billion, more than
the previous eight years combined is
the largest window in the industrys
history. This is particularly remarkable
because the window did not open in
Europe until early 2014.
US and European venture investment in early stage private companies holds steady
Seed and first rounds
All later rounds
Percentage of venture dollars invested
100%
80%
60%
40%
20%
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
37
Financing
The average IPO size was US$72 million,

continuing the trend set in 2013, but 21
companies raised over US$100 million.
Although only four of the 21 were
European companies, two were in the
global top three: UK-based Circassia
Pharmaceuticals and Forward Pharma
of Denmark. The IPOs of Circassia and
US-based Juno Therapeutics were also
the third- and fourth-largest biotech
IPOs of all time.
US and European biotechnology IPO pricing, 201014

Above range
Below range
80%
60%
40%
20%
0%
2010
2011
2012
2013
2014
The wide-open IPO window meant not

only that record numbers of companies
went public, but also that they did so
at favorable terms. (As discussed later,
this was in part because of strong postIPO market valuations and growth.)
As in 2013, roughly 60% of companies
going public did so within or above their
anticipated price ranges well above the
three-year average for 2010-12 of 36%.
38
Within range
100%
Percentage of IPOs
Of course, investor sentiment in 2014

was fundamentally different from
2000. The window in 2000 was driven
by undifferentiated enthusiasm over
the sequencing of the human genome
and the possibilities to come from that
breakthrough. In 2014, however, the
window was much more about real
market performance than scientific
promise. The window resulted from
the strong performance of biotechs
commercial leaders and important
clinical results from companies large
and small in some sense, the payoff
from the human genome project over
a decade later.
A record-breaking 94 US and European

biotech companies went public in 2014,
raising US$6.8 billion, for an average of
US$72 million per IPO.
Financing
Financing
US biotechnology financings, 200014

Debt
United States
Follow-on and other
IPOs
Venture
50
Capital rasied (US$b)
40
30
20
10
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
US biotechnology recorded a
colossal year in 2014, setting a new
all-time record in total capital raised
(US$45.1 billion) as well as funds raised
through IPOs (US$4.9 billion) and debt
(US$23.3 billion). The amounts raised
in the two other financing categories
represented the second-highest totals
in the industrys history: venture capital
generated US$5.6 billion (second to
the US$6.1 billion raised in 2007) and
follow-on financing raised US$10.7 billion
(behind the almost US$13 billion raised
in 2000).
The sectors strong overall performance
was underpinned by successful launches
of well-differentiated products that could
attract premium prices, supported by a

more accommodating FDA, especially in
areas of high unmet need. Meanwhile, big
pharmas increasing need to fill its growth
gap also drew investors in anticipation of
acquisitions of biotech assets at significant
premiums, such as Roches US$8.3 billion
purchase of InterMune and Merck & Co.s
two multibillion-dollar offers, for Cubist
Pharmaceuticals (US$9.5 billion) and
Idenix Pharmaceuticals (US$3.9 billion).
(See accompanying Deals, 2014 article.)
As a result, generalist investors came
back to biotech, the best-performing
sector in the market for the last two years,
driving up equity values and pumping
much-needed capital into the sector.
39
Financing
Driven in part by the resurgent IPO

and follow-on financing markets,
2014 marked the highest amount of
innovation capital ever raised in the
sector US$21.1 billion, a 40% increase
over 2013. This is almost double the
10-year average of US$10.9 billion and
well ahead of the previous 10-year high
of US$15.1 billion set in 2013.
The two consecutive years of growth
in innovation capital bodes well for
the resilience of the biotech industry.
It gives smaller companies some of
which will develop to become the future
growth engines of the sector more
confidence to invest in R&D, more
opportunity to expand their pipelines
and more bargaining power with larger
companies, in both alliances and M&A.
Meanwhile, the amount of money raised
by commercial leaders grew by an
astonishing 127%, to US$23.9 billion.
This included six debt offerings of at
least US$1 billion. Gilead alone had two
US$4 billion offerings, one in March and
one in November of 2014.
Quarterly breakdown of US biotechnology financings (US$m), 2014

Q1
Q2
Q3
Q4
Total
IPOs
$1,739
(23)
$1,055
(17)
$958
(13)
$1,193
(10)
$4,946
(63)
Follow-on and other
$4,651
(83)
$2,047
(47)
$1,081
(27)
$2,943
(49)
$10,722
(206)
Debt
$6,711
(31)
$9,734
(44)
$2,031
(40)
$5,325
(26)
$23,801
(141)
Venture
$1,333
(95)
$1,882
(115)
$1,059
(103)
$1,325
(70)
$5,600
(383)
$14,434
(232)
$14,719
(223)
$5,130
(183)
$10,786
(155)
$45,069
(793)
Total
Figures in parentheses are number of financings. Numbers may appear inconsistent because of rounding.
Innovation capital in the US, 200014

Innovation capital
Capital raised by commercial leaders
50
40
Boom times for

innovation capital
30
20
10
00
01
02
03
04
05
06
07
08
09
10

40
11
12
13
14
Financing
Innovation capital raised by leading US regions, 2014

Midwest
New England
New Jersey
New York State
Pacific Northwest
San Diego
Innovation capital raised (US$b)
0
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Venture capital raised (US$m)

Size of bubbles shows relative number of financings per region. Innovation capital is the amount
of equity capital raised by companies with revenues of less than US$500 million.
Unsurprisingly, New England (which raised

US$4.9 billion in innovation capital), the
San Francisco Bay Area (US$4.4 billion)
and San Diego (US$3.1 billion) continued
to be the nations leading biotech venture
and innovation capital hotspots in 2014.
New England led in total number of
innovation capital deals (131) and venture
capital deals (80). The Bay Area attracted
the most venture capital (US$1.4 billion),
followed by New England (US$1.3 billion)
and San Diego (US$654 million) together,
these three regions attracted 61% of all

US venture investment in 2014. The Bay
Area (US$1.3 billion), New England
(US$1.1 billion) and the Pacific Northwest
(US$621 million), with significant tailwinds
from Juno Therapeutics, were the leaders
in IPO dollars.
From 2013 to 2014, San Diego continued
to move up the innovation capital league
table. The region attracted US$1.6 billion
more in innovation capital in 2014 than
it did the previous year. Follow-on public

offerings were up almost US$1.2 billion,
which included seven rounds of at least
US$100 million. Receptos alone raised
US$619 million.
If commercial leaders were added to the
figures, San Francisco Bay Area, New
England and San Diego would account for
56% of the total amount of capital raised
in the US during 2014.
41
Financing
The resurgence of US venture capital

While US venture capital held steady in
the immediate aftermath of the financial
crisis, we expected to see a drop in
funding a few years down the road,
because VCs were raising less money from
limited partners, and there is lag between
funds raised and funds disbursed by
venture funds.
But the proverbial other shoe never
dropped. Instead, venture investment
remained remarkably consistent from
2008 through 2013.
In 2014, however, the resurgent IPO

market and the prospect of M&A exits
at higher valuations led to an upsurge
in funds raised by life sciences venture
capital firms, as well as their investment
in the sector. The US$5.6 billion invested
in 2014 was 27% higher than the previous
10-year average of US$4.4 billion. In
2014, average and median deal sizes of
venture financings also reached their
highest totals since 2007.
There was one record that didnt fall in

2014: the largest venture round. On 4
January 2015, Moderna Therapeutics
closed a US$450 million financing,
the largest ever for a privately held
biotechnology company.
The average deal size was skewed by nine
deals of more than US$70 million (against
just three of that size in 2013), four of
which tipped the US$100 million mark.
US biopharmaceutical venture capital rebounds to its highest levels since the financial crisis
Total amount raised
Average deal size
18
15
12
4
9
3
6
1
0
2000
2001
2002
2003
2004
2005
2006
42
2007
2008
2009
2010
2011
2012
2013
2014
Average deal size (US$m)
Financing
Top US venture financings, 2014

Amount
(US$m)
Month
Company
Region
Lead product clinical stage
Therapeutic focus
Intarcia Therapeutics
New England
Phase III
Metabolic/endocrinology
200
March
Juno Therapeutics
Pacific Northwest
Phase I
Oncology
134
August
Invitae
Services, technologies and tools
Multiple
120
October
Adaptive Biotechnologies
Pacific Northwest
Multiple
105
April
Paratek Pharmaceuticals
New England
Phase III
Infection
93
June
Naurex
Midwest
Phase II
Neurology
80
May
Spark Therapeutics
Pennsylvania/Delaware Valley
Phase III
Multiple
73
May
Human Longevity
San Diego
Multiple
70
March
Melinta Therapeutics
New England
Phase III
Infection
70
February
C3 Jian
Phase II
Dental
61
March
Viamet Pharmaceuticals
North Carolina
Phase II
Infection
60
October
Precision Therapeutics
Midwest
Multiple
60
November
Kolltan Pharmaceuticals
New England
Phase I
Oncology
60
March
ProNAi Therapeutics
Midwest
Phase II
Oncology
60
April
Juno Therapeutics*
Pacific Northwest
Phase I
Oncology
56
April
* In April 2014, Juno Therapeutics added US$56 million to its 2013 Series A round.
The largest sum raised was by Intarcia

Therapeutics, a Boston-headquartered
developer of a tiny subdermal pump that
can regulate the delivery of exenatide for
diabetes and obesity patients.
It is also noteworthy that Juno Therapeutics

IPO the largest of 2014 was fueled
by two big venture rounds for a total of
US$190 million during 2014. The company
also raised US$120 million in December
2013, which meant that it raised a total of
US$310 million in less than 12 months.
Meanwhile, 23% of US biotech VC rounds

in 2014 were early-stage (defined as
seed or first round). Thats exactly the
same proportion as the previous 10-year
average, but down from 27% in 2013.
43
Financing
US biotechnology IPOs, 200014

Capital raised
Number of deals
70
60
50
40
30
Number of deals
Capital raised in IPOs (US$b)
20
1
10
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
The IPO bounce

For the second straight year, a surging
IPO market breathed new life into the
US biotech financing landscape. New
benchmarks were set in terms of both the
number of public listings (63) and proceeds
raised (US$4.9 billion), outstripping
previous records set in 2000-01 at the
height of the genomics bubble, when 52
IPOs raised US$4.5 billion.
Of course, the 2014 boom came on the
heels of a very strong 2013 (itself the
third-biggest IPO year in the industrys
history), meaning that the sector has
44
experienced an unprecedented two-year

surge in which 101 companies went public
and raised a combined US$8.2 billion.
To put that in perspective, roughly the
same number of IPOs occurred in the eightyear period between 2005 and 2012.
The 2014 biotech IPO ledger is filled
with new benchmarks. Although the
average deal size remained consistent
with 2013 and the overall 15-year
average, more than three-quarters (48)
of the biotechs that went public in 2014
brought in more than US$50 million in
their initial offerings, while 17 cleared

the US$100 million mark. The previous
record of 16 was set back in 2000, while
the third-highest total was 13 IPOs in
2013. 2014 closed with the secondlargest US biotech IPO on record, when
Juno Therapeutics raised more than
US$300 million. (The US record holder
remains Talecris Biotherapeutics
US$950 million IPO in 2009.) Nearly 60%
of new companies listed within or above
their IPO ranges.
Financing
The 2013-14 IPO window has been

sustained by strong after-market
performance. Of the 63 IPOs in the
class of 2014, 40 (63%) had positive
returns through 31 December 2014,
16 were up more than 100%, and two
earned returns of more than 335%:
Radius Health (specializing in endocrine
disorders) and Auspex Pharmaceuticals
(focused on neurological disorders).
The IPO class as a whole was up 27%
through 31 December 2014 (and
44% through 31 March 2015). Such
returns have bolstered investor interest
and confidence in the sector and
expectations of a raft of companies
aiming for IPO in the coming months.
2.0
25
1.6
20
1.2
15
0.8
10
0.4
0.0
Q1
Q2
Q3
Q4
Q1
Q2
2012
Q3
Q4
Q1
2013
Q2
Q3
Q4
Number of deals
Number of deals
Capital raised
2014
US biotechnology IPO pricing by quarter, 201314

Within or above expected range
Below expected range

40%
Q4
2014
It would be unreasonable to assume that

the most fruitful biotech IPO window in
history would stay wide open for much
longer, and indeed pricing power of new
issuers diminished in the fourth quarter
of 2014. That said, while only 10
companies went public in Q4, three were
among the largest of the year: Juno
Therapeutics, FibroGen and Bellicum
Pharmaceuticals. And as 2015 began,
the IPO queue remained robust.
The anatomy of a US IPO window
60%
54%
Q3
46%
38%
Q2
63%
73%
Q1
27%
50%
Q4
2013
As usual, therapeutics companies

dominated the scene: 92% of companies
that went public in 2014 were focused on
new therapies (up from 80% of the class of
2013), one-quarter of those in oncology.
50%
85%
Q3
15%
58%
Q2
42%
33%
Q1
0%
10%
20%
67%
30%
40%
50%
60%
70%
80%
90%
100%
45
Financing
Top US IPOs, 2014

Like Juno Therapeutics, nearly one-quarter of US biotech IPOs in 2014 were also focused on oncology, including three of the top five.
New England is home to 17 of the IPO class of 2014. Thirteen newly public biotechs are based in the San Francisco Bay Area.
Gross
raised
(US$m)
IPO pricing
range
Post-IPO
performance (as of
31 December 2014)
Company
Region
Lead product
clinical stage
Therapeutic focus
Juno Therapeutics
Pacific Northwest
Phase II
Oncology
305
Above
118%
FibroGen
Phase III
Multiple
168
Within
52%
Acucela
Pacific Northwest
Phase III
Ophthalmic
163
Within
-67%
Bellicum Pharmaceuticals
Texas
Phase II
Oncology
161
Above
21%
Kite Pharma
Phase II
Oncology
147
Above
239%
Versartis
Phase II
145
Within
7%
Ultragenyx Pharmaceutical
Phase II
Multiple
139
Above
109%
Dermira
Phase II
Dermatology
125
Within
13%
ZS Pharma
Texas
Phase III
Multiple
123
Above
131%
Avalanche Biotechnologies
Phase II
Ophthalmic
117
Within
218%
Akebia Therapeutics
Midwest
Phase II
Hematology/renal
115
Within
-32%
Otonomy
San Diego
Phase III
Ear, nose and throat
115
Within
108%
Revance Therapeutics
Phase III
Aesthetics
110
Within
6%
Zafgen
New England
Phase II
110
Within
93%
Tokai Pharmaceuticals
New England
Phase II
Oncology
105
Within
-2%
Dicerna Pharmaceuticals
New England
Phase I
Oncology
103
Above
10%
Sage Therapeutics
New England
Phase II
Neurology
103
Within
103%
Auspex Pharmaceuticals
San Diego
Phase III
Neurology
97
Within
337%
Concert Pharmaceuticals
New England
Phase II
Multiple
93
Within
-5%
Coherus Biosciences
Phase III
Multiple
92
Within
21%
46
Financing
Financing
European biotechnology financings, 200014

Debt
Europe
Follow-on and other
IPOs
Venture
10
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
The European biotech sector racked up

its strongest financing performance in
the history of the industry and posted the
second-strongest performance in each
individual financing category. Overall,
the sector raised US$9.2 billion 53%
more than in 2013, and a whopping 97%
more than the previous 10-year average.
IPOs raised US$1.9 billion. That is more
than in the prior seven years combined,
but well below the US$3.3 billion raised
in 2000. Follow-on financing brought in
US$3.1 billion, just shy of the US$3.2 billion
raised in 2007. Debt financing generated
US$2.2 billion, almost double the 2003-13
average of US$1.2 billion but below the
US$2.5 billion raised in 2013. And venture
capital raised US$2 billion, just $30 million
below the 2006 peak.
Its also noteworthy that more than

US$1.3 billion of the total raised
in Europe in 2014 came via two
formerly US companies now based in
Ireland: Jazz Pharmaceuticals, which
raised US$1.1 billion in two debt
offerings, and Alkermes, which raised
US$250 million via an equity deal.
As in the US, European company
financing slowed in the second half of
2014, primarily due to a drop in follow-on
offerings in the third quarter. IPO activity
came to an abrupt halt in November, with
no further activity through year-end. But
as 2015 began, a small cohort of European
companies entered the IPO queue.
47
Financing
Large and small European companies

all benefited from the banner 2014
investment bonanza. Led by the UK,
European innovation capital soared to
its highest levels ever US$6.5 billion
surpassing the US$5.6 billion invested in
2000. This uptick in innovation capital
was driven by resurgent IPO and follow-on
markets and increased venture capital
commitments. Indeed, venture investment
was responsible for 31% of the total.
Innovation capital in Europe, 200014

Innovation capital
Commercial leaders also enjoyed the

healthy funding environment by raising
US$2.8 billion, the greatest yearly total
since 2007. Innovation capital accounted
for 70% of total financing in 2014, up
from 58% in 2013.
The standout story in 2014 European
financing was the UK. While the UK has
been a perennial leader, in 2014 it hit a
seven-year high, raising US$2 billion in
innovation capital (31% of the European
total) and US$593 million in venture
capital (29% of the total). The UK also led
Europe in the number of funding rounds.
Industry observers attributed some of
this renewed investor confidence to
government tax breaks on investment
in R&D. EYs annual report on the UK
biotechnology sector pointed out that in
2013 there were more than 460 biotech
drugs in development in the UK, far more
than in any other European country.
Commercial leaders
10
The investment bonanza
00
01
02
03
04
05
07
08
09
10
11
12
13
14
Quarterly breakdown of European biotechnology financings, 2014

(US$m)
Q1
Q2
Q3
Q4
Total
$719
(9)
$214
(6)
$519
(10)
$405
(6)
$1,856
(31)
Follow-on and other
$1,349
(46)
$728
(23)
$170
(17)
$869
(27)
$3,116
(113)
Debt
$1,331
(6)
$80
(6)
$755
(14)
$82
(9)
$2,248
(35)
$314
(40)
$633
(56)
$487
(41)
$596
(46)
$2,030
(183)
$3,713
(101)
$1,654
(91)
$1,931
(82)
$1,952
(88)
$9,250
(362)
IPOs
Venture
Total
Figures in parentheses are number of financings. Numbers may appear inconsistent because of rounding.
48
06

Financing
Innovation capital raised by leading European countries, 2014

Belgium
Denmark
France
Germany
Israel
Netherlands
Switzerland
UK
2.5
Innovation capital raised (US$b)
2.0
1.5
1.0
0.5
0.0
0
100
200
300
400
500
600
700
Venture capital raised (US$m)

Size of bubbles shows relative number of financings per country.
The return of European venture capital

Total amount raised
Average deal size
2.5
12
Total amount raised (US$b)
8
1.5
6
1.0
2
0.5
0.0
Average deal size (US$m)
10
2.0
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
49
Financing
Top European venture financings, 2014

Company
Country
Lead product clinical stage
Status
Adaptimmune
UK
Oncology
Phase I
Amount
(US$m)
104
Month
September
Adapt Pharma
Ireland
Substance abuse
Phase not specified
95
May
Biocartis
Switzerland
Non-disease-specific
Molecular diagnostics
86
September
Cell Medica
UK
Infection
Phase III
82
November
Glycotope
Germany
Womens health
Phase III
73
March
NovImmune
Switzerland
Autoimmune
Phase II
66
February
Ascendis Pharma
Denmark
Phase II
60
December
Cardiorentis
Switzerland
Cardiovascular
Phase III
60
September
Nucana BioMed
UK
Oncology
Preclinical
57
April
ProQR Therapeutics
Netherlands
Respiratory
Phase not specified
56
April
Enigma Diagnostics
UK
Respiratory
50
October
Wilson Therapeutics
Sweden
Phase II
40
April
Kymab
UK
Autoimmune
Preclinical
40
May
Nordic Nanovector
Norway
Oncology
Phase I
40
June
Anokion
Switzerland
Autoimmune
Preclinical
36
May
Buoyed by renewed confidence

in European and US IPO markets,
European venture capital investment
in biotech surged in 2014 to levels not
seen since 2006, with US$2 billion
raised. The average deal size was
US$11.1 million, the highest since
2002. There were only 183 rounds in
2014, fewer than the previous 10-year
average of 218.
The improved figures for European
financing is good news. Larger
investments give European companies
more options for R&D, better
dealmaking opportunities and better
opportunities for market readiness than
they have had in many years.
50
But European companies remain at a

disadvantage to their US counterparts.
The median deal size for US companies
in 2014 was US$10 million, while for
European companies it was less than
half that figure.
was the relative share of early rounds.

In Europe, 70% of venture rounds were
early-stage, as opposed to 23% in the
US. Early-stage rounds accounted for
US$661 million in Europe in 2014
the highest total since at least 2002.
The consequences of this disparity are

evident. Since drug development costs are
no lower in Europe than in the US, smaller
deal sizes mean that European companies
face a longer road to market. They are
often forced to partner earlier than US
companies, have less power to negotiate
favorable deal terms and are less able to
retain the rights to their products.
Nine of the top 15 European venture

financings of 2014 were invested in UK
(5) or Swiss (4) companies, a reflection of
the relative maturity of the venture capital
sector in those countries. In addition,
the importance of Paris-based Euronext
as an IPO destination, combined with
factors such as the French governments
revamped R&D tax credit policies, should
help create a more favorable ecosystem
for biotech venture capital in France.
One important difference between

European and US venture investment
Financing
The largest venture investment in

Europe in 2014 was the US$104 million
first-round funding raised by UK-based
Adaptimmune, which is developing a
new range of drugs based on immune
system cells. The oversubscribed round, in
September, was one of the largest earlystage funding rounds of the last decade.
There were two other first-round
venture financings in the 2014 top
10: Switzerlands Novimmune, which
focuses on antibody-based drugs to
treat inflammatory, autoimmune and
other disorders, and Netherlands-based
ProQR Therapeutics, which is developing
RNA-based therapeutics for the treatment
of severe genetic disorders, with an initial
focus on cystic fibrosis.
Eyeing the IPOs

At the start of 2014, many industry
observers were wondering why the US
enthusiasm for biotech IPOs had not
crossed the Atlantic. Indeed, European
markets seemed stuck in a rut. Venture
funding had dried up after the credit crisis.
Investors in European markets had been
burned by a number of biotech failures in
the late 1990s and early 2000s, leading
many generalist funds to stop investing
in the sector. Perhaps European biotech
investors would never regain the passion
they had displayed in 2000, when
companies such as Serono, Actelion and
Crucell completed IPOs.
But things changed rapidly. The US
biotech IPO boom of 2013 soon gave
European investors a boost in confidence

and IPOs started to appear in February
when Egalet, uniQure and 4D Pharma
raised a total of US$177 million. Circassia
followed in March, and the floodgates
opened. Just four weeks after Circassias
launch, nine more European companies
had gone public, and by November
another 18 had followed suit, for a total
of 31 for the year.
To put this into perspective, the
US$1.9 billion raised in 2014 was as much
as the amount raised between 2007 and
2013 combined. The 2014 total was not
enough to rival 2000s US$3.3 billion,
nor did the 2014 average valuation of
US$60 million come close to 2000s
US$123 million. Whats more, only four of
the class of 2014 raised US$100 million,
against 11 in 2000.
European biotechnology IPOs, 200014

Number of deals
3.5
35
3.0
30
2.5
25
2.0
20
1.5
15
1.0
10
0.5
0.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Number of deals
Capital raised
51
Financing
Top European IPOs, 2014

Company
Country
Lead product
clinical stage
Therapeutic focus
Gross
raised
(US$m)
IPO pricing
range
Post-IPO
performance (as of
31 December 2014)
Circassia Pharmaceuticals
UK
Phase III
Autoimmune
333
Within
-15%
Forward Pharma
Denmark
Phase II
Autoimmune
235
Within
-1%
Molecular Partners
Switzerland
Phase II
Multiple
116
Below
3%
ProQR Therapeutics
Netherlands
Preclinical
Respiratory
112
Within
67%
uniQure
Netherlands
Marketed
Multiple
92
Above
-13%
MediWound
Israel
Marketed
Dermatology
80
Within
-52%
Horizon Discovery Group
UK
NA
Research and other equipment
66
NA
Auris Medical
Switzerland
Phase III
Ear, nose and throat
61
Below
-35%
Egalet
Denmark
Phase III
Neurology
58
Within
-53%
-34%
6%
Innocoll
Ireland
Marketed
Multiple
58
Below
Affimed Therapeutics
Germany
Phase II
Oncology
56
Below
-11%
arGEN-X
Netherlands
Phase I
Multiple
55
Within
-18%
Fermentalg
France
NA
Industrial
54
Within
-36%
Genticel
France
Phase I
Infection
53
Within
-35%
MacroCure
Israel
Phase III
Dermatology
53
Below
-27%
GalMed Pharmaceuticals
Israel
Phase II
44
Within
-57%
VBL Therapeutics
Israel
Phase II
Multiple
40
Below
-1%
Abzena
UK
NA
Research and other equipment
37
NA
-5%
Bio Blast Pharma
Israel
Phase III
Genetic
35
Within
-42%
Genomic Vision
France
NA
34
Within
-31%
A look at the top 15 European companies

that went public in 2014 reveals a depth
and breadth not seen since the IPO
class of 2000. The top 15 companies in
2014 range from several with products
already on the market to one ProQR
Therapeutics still at a preclinical stage.
Before 2014, no European IPO had raised
more than US$100 millon since Denmarks
Symphogen went public in 2011. In
2014, four IPOs exceeded this threshold:
Circassia, Forward Pharma, ProQR and
Molecular Partners.
52
At US$333 million, Circassias IPO was

the largest ever for the UK biotech sector.
The historic volume of the IPO was partly
driven by Circassias focus on developing
allergy vaccines. Even even before its
March listing, the company had raised
several of the UKs largest-ever rounds of
biotech venture capital.
priced their IPOs within or above their

anticipated ranges, that figure slumped
to 50% in the second half of the year.
Nonetheless, a degree of optimism has
returned to the European biotech IPO
market. This was evident in the first
quarter of 2015 as seven IPOs raised a
total of US$339 million.
Predicting the duration of an IPO window

is an inherently tricky proposition. Europe
had no IPOs after mid-November. And
while 73% of the European class of 2014
Of the 31 European companies that

went public in 2014, 25 (81%) were
focused on therapeutics; of those, 16%
were in Phase III, 12% had licensed their
Financing
When it comes to IPOs, European

companies have faced some tough choices
in recent years. Should they list their
shares in their home markets, or try their
luck with US investors in the white-hot
US market?
In 2014, the latter option looked like the
best one. Except for Circassia, which
was the first UK biotech to launch on
the London Stock Exchange since 2006,
eight of the top 10 European IPOs
occurred on the NASDAQ. Of the top
20 European biotech IPOs, those which
listed on NASDAQ raised US$58 million,
almost double the amount raised by the
companies that listed on Euronext in Paris
and the amount raised on AIM in London.
Markets formerly open to biotech IPOs,
such as Zrich and Frankfurt, now display
almost no interest in the sector. Of the
two German IPOs in 2014, one listed on
NASDAQ and the other on Euronext.
Still, seven companies did list on the
Euronext exchange in 2014. Strong
performance by Euronext-listed
companies may add fuel to ongoing
discussions at the European Commission
aimed at creating a united European
capital market.
One of the key differences between
companies that tested the IPO market in
Europe in 2014 and their US counterparts
is their relative post-IPO performances.
While 63% of US companies finished
the year trading up relative to their
IPO price, only seven, or 23%, of the

European 2014 IPO class could boast a
similar result, a potential dent to future
investor confidence in the sector.
in Europe, they find themselves at a

disadvantage, less able to attract the
coverage and investor interest that
homegrown US companies attract.
Post-IPO performance indicators are

a sobering reminder of the challenges
facing European companies, regardless
of where they list. As our chart shows,
European firms that listed on the NASDAQ
performed much worse than their US
counterparts. European firms 2014
post-IPO performance was negative
overall. The paradox for European firms
is that while they are able to raise more
funds up front by chasing a NASDAQ
listing than they would if they listed
The standout performer among European

IPOs in 2014 was Manchester-based
4D Pharma, whose price more than
doubled after its February debut on the
London AIM. Dutch company ProQR
Therapeutics (focused on genetic
disorders) and Swedens Gabather
(developer of CNS drugs) both delivered
returns of more than 60%, and
Denmark-based Saniona also pleased
investors after its debut on the Swedish
AktieTorget exchange.
Performance distribution of 2014 NASDAQ biotech IPOs (in %)

400
Parameters
360
Share price relative to offer price
products and another 12% had products

on the market. British, French and Israeli
companies each notched five IPOs.
Number of
companies
320
280
240
200
160
US
biotech
Europe
biotech
62
12
Highest
386%
67%
75 percentile
100%
-9%
11%
-31%
25 percentile
-10%
-45%
Lowest
-75%
-57%
Median
120
80
40
0
-40
-80
US companies (62)
European companies (12)
Share price relative to offer price was calculated as of 31 December 2014. Median data are shown in yellow bars.
Source: EY, Capital IQ and finance.yahoo.com.
53
Deals
Financing | Financing the future
Beyond borders 2015
Deals
54
Deals
Changing dynamics
The big picture

2014 was a breakout year for both M&A and licensing, as biopharma companies used transactions to
jump-start or shift business strategies in a sector where the dynamics are rapidly changing. Indeed, M&A
activity in the biotechnology sector reached an eight-year high in both deal number and value (excluding
megadeals, valued at US$5 billion or more). In all, the industry notched 68 biotechnology deals totaling
US$49 billion, a 46% increase over 2013.
Acquirers werent just paying more;

they were also paying more up front.
In contrast to 2013, when 45% of
the deals were structured to include
future earn-outs, only 33% of the M&A
transactions signed in 2014 used this
risk-hedging stratagem.
On the alliance front, biotech companies
brokered 152 licensing deals worth
US$46.8 billion. A review of the past eight
years of licensing activity shows 2014 was
the most lucrative for biotechs looking to
sign alliances, as the average up-front deal
value increased by 78% to US$41 million
from US$23 million in 2013.
This transactional uptick is partly explained
by the return of the public markets and
rising valuations, which have given biotechs
more financing options, and thus, more
bargaining power in deal negotiations.
Theres also more competition as big
pharmas compete with specialty pharma
companies and other biotechs for strategic
assets to bolster pipelines. As a result of
these forces, biotechs found themselves
in the transactional drivers seat, and
interested acquirers had little choice but
to pay at, or near, full value to win rights to
products of interest.
Pharma returns to
M&A dealmaking
A look at the numbers shows pharma
buyers were primarily responsible for the
years heightened deal activity. As we have
written in the last several issues of Beyond
borders, the pharma subsector continues
to face a number of headwinds, including
pricing pressures, R&D productivity
challenges and a slowdown in high-growth
emerging markets. These challenges have
resulted in the groups subpar revenue
relative to the industry overall. In 2014,
the need to accelerate growth helped
explain pharmas renewed emphasis on
dealmaking, despite the fact that target
valuations have reached record highs.
Indeed, M&A activity between pharmas and
either US or European biotechs reached a
level in 2014 not seen since 2009, when
Roche bought out the remaining shares
of Genentech that it didnt already own.
Excluding megadeals, pharmas spent more
in 2014 to acquire biotechs than they
had annually in the previous nine years.
Deal numbers also rebounded: pharmas
acquired 27 biotechs in 2014, the highest
deal volume since 2008.
An analysis of the years deals shows

that two different strategic priorities
drove much of pharmas M&A: first,
access to products that could fill revenue
gaps; second, acquisitions that enabled
companies to achieve scale in businesses
or therapeutic areas where they believe
they are, or can be, market leaders. Indeed,
in 2014, certain pharmas began to distance
themselves from the diversification
strategies they employed to smooth out
earnings at the height of the patent cliff.
This emphasis on focus fueled not just
a wave of pharma-biotech M&A, but a
number of intra-pharma transactions.
Thus, certain companies divested
adjacent businesses (e.g., animal health
or consumer health) and/or therapeutic
businesses that had been deprioritized,
while others took the opportunity to
acquire available assets. By focusing on
fewer areas and achieving real depth,
pharmas hope not only to rationalize their
R&D and commercial efforts. They also
aim to build franchises that offer an array
of solutions across the care paradigm,
potentially making their products more
compelling to stringent health care buyers.
55
Deals
US and European M&As, 200714

Biotech-biotech
Potential value (US$b)
Pharma-biotech megadeals (>US$5b)

Number of deals
70
70
60
60
50
50
40
40
30
30
20
20
10
10
2007
2008
2009
2010
2011
2012
2013
2014
Number of deals
Pharma-biotech
Biotech-biotech megadeals (>US$5b)
companies enter faster-growing therapeutic

battlegrounds such as oncology or
hepatitis C, the increasing competition
and pushback from payers threaten to
decelerate big biotechs growth rates.
This is particularly true for biologics
developers, which, for the first time, face
the prospect of biosimilar competition in
the US marketplace.
Chart excludes transactions where deal terms were not publicly disclosed.
Biotech buyers?
Biotech buyers, meantime, signed 41
transactions in 2014, making them a
presence at the deal table. However, in
terms of the number of deals, that is the
second-lowest volume of biotech-biotech
transactions since 2007. (The lowest was in
2013, when there were 33 deals.)
Biotech-biotech deal values also retreated,
with the total dollars spent in 2014
dipping 51% year over year to one of the
lowest levels in the past decade. Smaller
biotechs, as opposed to the commercial
leaders, accounted for most of the years
56
M&A activity. Like their pharma brethren,

the data suggest the biotechs that were
buying were most interested in acquiring
products or platforms in their core
therapeutic areas.
That the biotech commercial leaders
eschewed M&A in 2014 isnt too
surprising. As we noted in Firepower
fireworks, EYs 2015 Firepower Index
and Growth Gap Report, strong product
launches in recent years mean the bigger
biotechs have not felt pressured to do
deals to fill revenue growth gaps.
That could change in 2015 and 2016 as big
biotechs face their own headwinds. As more
In some ways, big biotechs are also

victims of their own success. Thanks
to robust pipelines, they have posted
revenue growth numbers that are difficult,
if not impossible, to sustain without
resorting to inorganic means.
The good news for the biotechnology
commercial leaders is that they have an
arsenal of firepower at their disposal
when they are ready to consider strategic
M&A. EY defines firepower as an
acquirers capacity for deals based on its
market valuation, its debt capacity and the
strength of its balance sheet. According to
the EY Firepower Index, which measures,
in aggregate, the firepower of various
biopharma buyers, big biotechs firepower
grew 30% from 2013 to 2014. Compare
that increase to the more modest uptick
associated with big pharmas, which as
a class, posted only a 13% increase in
available firepower in the same year.
In an era when big biotechs, big pharmas
and specialty pharmas are often
competing for the same assets, what
matters most is relative firepower. As a
class, big pharmas still command more
firepower than their rivals; however, EYs
analysis shows big biotechs and specialty
pharmas continue to make gains that, in
Deals
Big pharma continues to command the most firepower, even as its

relative share of total firepower declines to an eightyear low
Big pharma
Specialty pharma
from a high of 12 to just three. After a

three-year slump, 2014 marked another
bonanza year for the billion dollar club,
matching 2010 in terms of the number of
deals that met this threshold.
Big biotech
100%
In 2014, pharmas werent just the most

active acquirers; they were also the
most active in-licensers. The potential
deal values for pharma-biotech alliances
grew 59% from 2013 to 2014. This is in
contrast to 2013, when a slate of strong
biotech buyers drove the year-over-year
growth in alliance values. Indeed, while
biotech in-licensers committed to spend
US$10.5 billion on alliances in 2014,
virtually the same amount as for 2013,
average total deal values for dropped 13%.
Share of total firepower
80%
60%
40%
20%
0%
2007
2008
2009
2010
2011
2012
2013
2014
Data analyzed through 14 December 2014. Total firepower refers to the combined firepower of big pharma,
specialty pharma and big biotech.
the future, could make it more challenging

for big pharmas that are relying on M&A
for new product growth. These shifts
in firepower are likely to influence deal
trends in 2015 and beyond, including
pushing certain acquirers into licensing
situations as they look for more affordable
strategies to access products.
A strong year for

biotech alliances
The 2014 alliance data also show it was
clearly a biotechnology sellers market.
The number of strategic alliances
rebounded sharply from 2013 to 2014,
reaching a level not seen since 2010.
Although alliance volumes remained

roughly 20% below the 2007 peak,
average potential deal values in 2014
reached their highest level since the
financial crisis. Indeed, biotechs that
licensed products in 2014 garnered
potential deals worth an average of
US$279 million; that is a 17% increase
over the previous highest average
deal size of US$238 million, which was
achieved in 2008.
Another metric that demonstrated 2014s
warmer licensing climate was the number
of alliances with potential deal values
greater than US$1 billion. From 2010
to 2011, the number of alliances worth
US$1 billion or more dropped sharply
Meanwhile, pharma in-licensers nearly

doubled the amount they committed to
alliances to US$36.3 billion. The average
total value for a pharma-biotech alliance
increased 21% from 2013 to 2014 to
US$367 million, while the median total
deal value for pharma-biotech alliances
increased from US$143 million to
US$148 million.
These soaring amounts shouldnt be
surprising given the macro forces at work
in the life sciences. The robust IPO and
follow-on markets of 2014 meant biotechs
were less dependent on transactions to
finance themselves and could therefore
focus on deals that furthered their strategic
objectives. Moreover, as competition
increased, biotechs found themselves
in the welcome position of garnering
top dollar for their assets, especially for
late-stage, de-risked products.
57
Deals
Both pharma and biotech in-licensers

contributed to the gains. Biotech
in-licensers spent twice as much on
up-front payments in 2014 as they did
in 2013; pharma in-licensers, meantime,
spent 88% more on up-front payments
(US$3.4 billion) in the same time period.
Indeed, in 2014, both biotech and pharma
buyers paid more up front to access
key technologies and products than at
any other time since the financial crisis.
Year over year, big pharma up-front
fees increased, on average, 49% to
US$53 million, while biotech up-front
payments increased 44% to US$39 million.
The uptick is even more striking when the
years figures are compared to the averages
associated with the prior three-year period.
Pharma up-front payments spiked 85% in
2014 compared to 2011-13, while biotech
up-front payments climbed 103%.
50
200
40
160
30
120
20
80
10
40
2007
2008
2009
2010
2011
2012
2013
2014
Chart shows potential value, including up-front and milestone payments, for
alliances where deal terms are publicly disclosed.
Source: EY, Medtrack and company news.
US and European strategic alliances based on upfront payments, 200714

Pharma-biotech
Biotech-biotech
Up-fronts/biobucks
14%
12%
10%
8%
3
6%
2
4%
2%
2007
2008
2009
58
Number of deals
Number of deals
Biotech-biotech
2010
2011
2012
2013
2014
0%
Up-fronts as a share of biobucks
In 2014, biotech licensers saw

year-on-year total up-front payments for
alliances soar 96% (from US$2.6 billion
to US$5.1 billion). As a percentage of total
deal value, up-front payments reached
11%, a level not seen since before the
financial crisis.
Pharma-biotech
As noted, in 2014 biotech licensers

captured more value at a deals signing.
From 2005 to 2007, biotech licensers
realized, on average, 11% of an alliances
value in the up-front payment. For the
next six years, that value slowly declined,
averaging 10% from 2008 to 2010 and
just 8% for the 2011-13 time span.
US and European strategic alliances based on biobucks, 200714
Up-front value (US$b)
Capturing more
value up front
Deals
A historic analysis of deal premiums paid

for each of the top 10 acquisitions for the
past six years shows the difference a year
can make. In 2009, acquirers of the top 10
biotechs paid bid premiums that averaged
63%. Those average bid premiums
declined over the next four years, reaching
a nadir of 36% in 2013. In 2014, as
biotechs options improved, bid premiums
increased nine percentage points to 45%.
Consistent with biotechs stronger position
at the bargaining table, only six of the
largest deals of 2014 included contingent
value rights (CVR). When pharma or
biotechs felt compelled to acquire, the
strategic priority was great enough that
companies were willing to pay large sums
up front without hedging their bets via
contingency payments.
In contrast to 2013, big pharmas in
2014 were much more visible at the
acquisition table, signing six of the top 15
deals, including the years three biggest
money-getters. Biotechs, meanwhile, were
buyers in just two of the years top deals.
Merck & Co. and Roche were the years
top acquirers, spending, respectively,
US$13.4 billion and US$10 billion on
biotechs. Both pharmas signed megadeals
during the year: Merck purchased Cubist
Pharmaceuticals in a transaction worth
US$8.4 billion in cash and another
US$1.1 billion in assumed debt; Roche,
meantime, spent US$8.3 billion to acquire
InterMune and its lead drug pirfenidone,
a potential blockbuster for idiopathic
pulmonary fibrosis.
Bid premiums for top 10 M&As, 200914

Bid premium median (%)
Bid premium average (%)

70%
60%
50%
Percentage
Notable biotech
transactions
40%
30%
20%
10%
0%
2009
2010
2011
2012
2013
2014
Chart excludes transactions where bid premium was not publicly disclosed.
Chart includes biotech deals only.
Merck also purchased hepatitis C drug

developer Idenix in 2014. The deal doublet
exemplifies big pharmas belief in the
strategic importance of building marketleading commercial franchises. Having
divested its consumer health business
to Bayer HealthCare in October 2014,
Merck used the proceeds to strengthen
its pipeline of anti-infectives. Via Cubist,
it has gained a suite of acute care hospital
products that complement its existing
portfolio of antibiotics. The Idenix
transaction, meantime, has given the New
Jersey-based pharma access to promising
early-stage drug candidates in a lucrative
therapeutic area.
Roches acquisition of Seragon was also
noteworthy. For starters, it wasnt Roche,
but its subsidiary Genentech, which
brokered the deal. Historically, Genentech
has not been an aggressive acquirer,
preferring to tap its highly productive

internal R&D group for future products.
The up-front cash associated with the deal
also made it difficult to ignore. Genentech
shelled out US$725 million up front for a
Phase I asset and a back-up compound, and
agreed to another US$1 billion in earn-outs.
That Genentech was willing to pay so
much for such early-stage compounds
highlights both the scarcity of high-quality
oncology assets and the belief that
commercial success requires a solution
mentality whereby companies develop
therapeutic combinations to treat the full
spectrum of a disease. In this instance,
the Seragon acquisition gives Genentech
access to two next-generation selective
estrogen receptor degraders (SERDs) that
could be combined with other molecules
in the Roche/Genentech pipeline to treat
estrogen-driven cancers.
59
Deals
Selected M&As, 2014

Acquiring company
Country
Acquired company
Country
Total potential
value (US$m)
CVRs/milestones
(US$m)
Merck & Co.
US
Cubist Pharmaceuticals
US
9,500
Roche
Switzerland
InterMune
US
8,300
Merck & Co.
US
Idenix Pharmaceuticals
US
3,850
Otsuka Pharmaceutical
Japan
Avanir Pharmaceuticals
US
3,500
Meda
Sweden
Rottapharm
Italy
3,093
Forest Laboratories
US
Aptalis Pharma
Canada
2,900
Endo International
Ireland
Auxilium Pharmaceuticals
US
2,600
Johnson & Johnson
US
Alios BioPharma
US
1,750
Roche/Genentech
US
Seragon Pharmaceuticals
US
1,725
1,000
Baxter International
US
Chatham Therapeutics
US
1,410
1,340
Mallinckrodt
US
Cadence Pharmaceuticals
US
1,400
AMAG Pharmaceuticals
US
Lumara Health
US
1,025
350
US
AesRx
US
843
828
BioMarin Pharmaceutical
US
Prosensa
Netherlands
840
160
Teva Pharmaceuticals
Israel
Labrys Biologics
US
825
625
Bristol-Myers Squibb
US
iPierian
US
725
550
Total potential value includes up-front, milestone and other payments from publicly available sources.
Source: EY, Capital IQ, Medtrack and company news.
Of the biotech-biotech deals, the

most notable were Medas acquisition
of Rottapharm and BioMarin
Pharmaceuticals acquisition of Prosensa.
Not only was Medas acquisition of
Rottapharm the largest European
biotech acquisition, it was also indicative
of 2014s eat or be eaten dynamic,
and one means Meda used to stave off
its interested acquirers. In many ways,
BioMarins Prosensa purchase represents
a calculated risk for the California-based
biotech. BioMarin announced the deal
following news that Prosensas latestage treatment for Duchenne muscular
dystrophy had failed to show a meaningful
benefit in clinical trials.
60
In 2014, biotechs with differentiated,

late-stage assets or novel platforms had
the luxury of negotiation from a position
of strength.
Deals
Notable biotech alliances

In 2014, 13 alliance transactions cleared
the US$100 million up-front threshold,
a marked uptick from 2013 when only
seven deals met this bar. In terms of total
biobucks, 12 alliances garnered potential
deal values of at least US$1 billion versus
five the prior year.
Access to promising new technologies
and the potential for multi-target
collaborations drove some of the biggest
up-front payments. As was true in 2013,
ModeRNA Therapeutics (messenger RNA
therapeutics) and FORMA Therapeutics
(drug discovery) were among the top 15
alliance getters of 2014.
Alnylam Pharmaceuticals also signed a
noteworthy deal with Sanofis Genzyme
subsidiary for access to the biotechs
rare disease treatments. As part of the
deal, Sanofi took a 12% equity stake in
Alnylam and retains an option to buy
as much as 30% of the biotech at some
point in the future. The US$700 million
down payment provides Alnylam with
considerable financial optionality as it
continues to develop its experimental
treatment for transthyretin-familial
amyloid polyneuropathy.
With pharma buyers looking for
near-term revenues, its hardly surprising
that in 2014 late-stage products also
garnered rich up-fronts. Celgene,
which continued its aggressive alliance
strategy, sought to deepen its pipeline
of inflammation assets, acquiring rights
to the first-in-class Phase III Crohns
disease therapy from Nogra Pharma
Alliances with big upfront payments, 2014

Up-front
payments
(US$m)
Company
Country
Partner
Country
Celgene
US
Nogra Pharma
Ireland
710
Sanofi/Genzyme
US
Alnylam Pharmaceuticals
US
700
Pfizer
US
OPKO Health
US
295
AbbVie
US
Infinity Pharmaceuticals
US
275
Celgene
US
Forma Therapeutics
US
225
Novartis
Switzerland
Ophthotech
US
200
Servier
France
US
171
Sanofi
France
MannKind
US
150
Roche/Genentech
US
NewLink Genetics
US
150
Alexion Pharmaceuticals
US
ModeRNA Therapeutics
US
125
Johnson & Johnson
US
MacroGenics
US
125
Daiichi Sankyo
Japan
Charleston Laboratories
US
100
US
US
100
Celgene
US
Sutro Biopharma
US
95
Pfizer
US
Cellectis
France
80
with the years largest up-front payment.

OPKO Health, Infinity Pharmaceuticals,
Ophthotech and Intarcia Therapeutics
also signed rich deals for late-stage
assets in the orphan disease, oncology,
ophthalmology and diabetes arenas.
Which companies were the most
prominent in-licensers of 2014? As
a group, Japanese pharmas were
noticeable, participating in three of the
years largest alliances based on biobucks.

Of the individual pharmas, Johnson &
Johnson, Takeda Pharmaceuticals and
Roche were the most active individual
players, brokering alliances with publicly
disclosed potential deal values totaling
US$4.5 billion, US$2.2 billion and
US$2.0 billion, respectively. For the
second year in a row, Celgene was 2014s
top biotech in-licenser with five publicly
disclosed deals worth US$4.5 billion.
61
Deals
Big biobucks alliances, 2014

Total potential
value (US$m)
Up-front
payments (US$m)
Company
Country
Partner
Country
Dainippon Sumitomo Pharma
Japan
Edison Pharmaceuticals
US
4,295
Pfizer
US
Cellectis
France
2,855
80
Celgene
US
Nogra Pharma
Ireland
2,575
710
Merck & Co.
US
Ablynx
Belgium
2,297
27
60
Takeda Pharmaceutical
Japan
MacroGenics
US
1,600
ND
Viking Therapeutics
US
Ligand Pharmaceuticals
US
1,538
ND
Bristol-Myers Squibb
US
CytomX Therapeutics
US
1,242
50
Astellas Pharma
Japan
Proteostasis Therapeutics
US
1,200
ND
Celgene
US
Sutro Biopharma
US
1,185
95
Roche
US
NewLink Genetics
US
1,150
150
Servier
France
US
1,051
171
Novartis
Switzerland
Ophthotech
US
1,030
200
US
US
970
100
Johnson & Johnson
US
Geron
US
935
35
Sanofi
France
MannKind
US
925
150
Total potential value includes up-front, milestone and other payments from publicly available sources.
ND refers to deals where up-front amounts were not publicly disclosed.
Realizing value
In 2013, the story was one of promise.
A warming financing climate and
greater competition for deals created
a more positive dealmaking climate;
for smaller biotechs and their backers,
there was renewed hope that as a class,
biotechs would recognize more value
for their efforts.
In 2014, that promise became reality.
The same market forces at work in
62
2013 strengthened in 2014, creating an

unprecedented year for transactions.
Biotechs with differentiated, late-stage
assets or novel platforms had the luxury of
negotiating from a position of strength, a
welcome change from just a few years ago.
While the shift is worth celebrating,
some pressing issues could darken the
optimistic skies of the life sciences sector.
Ongoing questions about pricing and
access to truly breakthrough innovations

continue to dog the industry. Payers
around the globe are offering tough words
about the value of late-stage or newly
launched pharmaceuticals.
In this new value-oriented world, biotech
management teams must remain vigilant,
making sure capital allocation strategies
are aligned with their operational
performance goals.
Deals
Pharma-biotech
United States
Biotech-biotech
Biotech-biotech megadeals (>US$5b)

Number of deals
60
75
50
60
40
45
30
30
20
15
Number of deals
Deals
US M&As, 200714
10
2007
2008
2009
2010
2011
2012
2013
2014
Excluding megadeals, 2014 was the

strongest year since 2007 for biotech
M&A in the United States. Including
megadeals, potential deal values increased
sharply over 2013 to US$42.9 billion. That
is the third-highest annual deal total since
2007. All in, there were 51 transactions
involving US biotechs, a new eight-year
high in terms of deal volumes.
Both pharma and biotechs were active
in-licensers of US biotech products in
2014. In terms of total potential deal
values, pharma-biotech alliances in 2014
generated US$25.5 billion, the largest
money total since 2007; US-focused

biotech-biotech alliances, meanwhile,
generated US$10.4 billion, equaling
the dollar record set the year before.
The total alliance value increased 73%
year-over-year in 2014, as a result of
pharmas renewed interest in dealmaking.
Although the number of alliances still
lags the peak observed in 2006 (when
the US biotech industry witnessed
nearly 150 licensing deals), the 112
transactions signed in 2014 represent
a 16% year-over-year increase and the
volume is consistent with deal volumes
63
Deals
In 2014, biotech
companies realized
more value from
their licensing
efforts than in
recent memory.
40
160
35
140
30
120
25
100
20
80
15
60
10
40
20
2007
2008
2009
2010
2011
2012
2013
2014
Chart shows potential value, including up-front and milestone payments,

for alliances where deal terms are publicly disclosed.
US strategic alliances based on upfront payments, 200714

Pharma-biotech
Biotech-biotech
Up-fronts/biobucks
4.0
12%
3.0
9%
2.0
6%
1.0
3%
0.0
2007
2008
2009
64
Number of deals
Number of deals
Biotech-biotech
2010
2011
2012
2013
2014
0%
Pharma-biotech up-fronts reached

US$3.0 billion in 2014, the highest level
since 2006. Biotech-biotech up-fronts
were a healthy US$774 million,
the second highest since 2008s
US$801 million.
Pharma-biotech
Up-front payments in 2014 skyrocketed

to US$3.8 billion, increasing 111%
year-over-year to the highest level since
before 2007. Perhaps more important,
biotechs in 2014 realized more up-front
value from their licensing efforts (11.8%)
than in recent memory. That is about a
five percentage point improvement from
2007, when buyers were willing to pay,
on average, just 7% of a deals potential
price tag at its signing.
US strategic alliances based on biobucks, 200714
seen over the last five years. More

important, biotech partners are clearly
in a stronger negotiating position than
they were in years past. On average,
US biotechs that licensed products
in 2014 got commitments of nearly
US$330 million, the highest dollar total
since at least 2007.
Deals
European M&As, 200714

Pharma-biotech
Europe
Biotech-biotech
Number of deals
25
30
20
24
15
18
10
12
Number of deals
Deals
2007
2008
2009
2010
2011
2012
2013
2014
For European biotechs, 2014 was the

second robust M&A year in a row as
median deal sizes reached a healthy
US$51 million. Deal volume remained
strong in 2014; the number of transactions
involving a European biotech (27)
increased 22% from 2013. Europe hasnt
seen that many biotech M&As since
2007, when 30 deals closed. Excluding
megadeals, total deal proceeds for the
year were the second highest observed
since 2007.
Similar to the US situation, pharmas were
responsible for most of the acquisition
activity, accounting for US$4.9 billion of
the US$6.9 billion in acquisition dollars.
As was also the case in 2013, when Shire
purchased ViroPharma for US$4.2 billion,
the 2014 annual deal total was heavily
influenced by a single deal: Medas

acquisition of Rottapharm. Other notable
transactions were Roches takeout of
Santaris Pharma, worth US$250 million
up front and another US$200 million
in earn-outs, and ProStrakan Groups
purchase of Archimedes Pharma for
US$379 million.
In concert with the rebound in
European M&A, it was an equally strong
year for European alliances, as the
average potential deal value reached
US$227 million. Indeed, the potential
value associated with European biotech
alliances in 2014 was the greatest since
2007. Much of the year-over-year growth
in deal values was driven by biotech
licensing, which increased more than
300% to a new high of US$4.6 billion.
65
Deals
Pharma-biotech
Biotech-biotech
Number of deals
18
75
15
60
12
45
9
30
6
15
Number of deals
European up-front payments totaled more

than US$1.2 billion in 2014, representing
just 8% of the total European alliance
value. The up-front to biobucks ratio is
a sign that European biotechs still dont
have as much bargaining power as their
US counterparts. That is not surprising
given that the capital markets in Europe
have lagged behind those in the US.
European strategic alliances based on biobucks, 200714
Deal values for pharma-biotech alliances

grew a more modest 26% from 2013
to 2014; still, that represented the
second-highest dollar total of the past
eight years for such deal types. In addition,
it was the pharmas that brokered some of
the largest deals, including Pfizers alliance
with Cellectis (potentially worth US$2.9
billion) and Merck & Co.s partnership
with next-generation antibody developer
Ablynx (potentially worth US$2.4 billion).
2007
2008
2009
2010
2011
2012
2013
2014
Chart shows potential value, including up-front and milestone payments,

for alliances where deal terms are publicly disclosed.
66
Pharma-biotech
Biotech-biotech
Up-fronts/biobucks
1.5
15%
1.2
12%
0.9
9%
0.6
6%
0.3
3%
0.0
2007
2008
2009
2010
2011
2012
2013
2014
0%
The 2014 annual alliance numbers were

heavily influenced by the Celgene/Nogra
transaction. If this deal, which included a
US$710 million up-front, is excluded from
the annual total, then up-front payments
to European biotechs actually declined
below the level achieved in each of the last
two years. Moreover, up-front payments
as a percentage of the total alliance values
declined to just 5%.
European strategic alliances based on upfront payments, 200714
Indeed, such data are consistent with the

continuing trend of EU companies choosing
to tap the US public markets instead of
exchanges closer to their home countries.
As we note in the accompanying article,
The European biotechs strategic decision:
list in Europe or the US? a certain cadre
of European biotechs are trying to tap
the more sophisticated investor base
associated with the US market.
Deals
The biotechnology
industrys strong
performance in
2014 across so
many different
metrics is a reason
to celebrate.
Indeed, the view
from the top is
pretty good.
67
Appendix
Beyond borders 2015
Appendix
68
Appendix
Acknowledgments
Project leadership
Data analysis
Design
Glen Giovannetti, EY Global Life Sciences

Leader, provided the strategic vision
for this report and brought his years of
experience to the analysis of industry
trends. He also brought a hands-on
approach, editing articles and helping to
compile and analyze data.
Lisa-Marie Schulte, Tanushree Jain,

Eva-Maria Hilgarth, Richa Arun and
Ashish Kumar conducted all of the
research, collection and analysis of
the reports data.
This publication would not look the way it

does without the creativity of Mike Fine,
who was the lead designer for this project.
This is the first Beyond borders report in
which he has been involved.
Additional analysis of the Canadian

financing data were provided
by Yann Lavalle, Lara Iob and
Mario Piccinin.
PR and marketing
Siegfried Bialojan, German Biotechnology

Leader, and Jrg Zrcher, EMEIA
Biotechnology Leader, provided guidance
on the development of the European
content. Siegfried also conducted the
interview with Jrn Aldag.
Ellen Licking and Gautam Jaggi, EYs
Life Sciences Lead Analysts, were
the reports lead authors and editors.
Iain Scott contributed insights and helped
draft the Financing, 2014 article.
As the project manager for Beyond
borders, Jason Hillenbach had
responsibility for the entire content
and quality of this publication. He
was also directly accountable for the
primary data analysis and research
throughout the report.
Kim Medland, Jason Hillenbach,

Amit Nayak and Ellen Licking conducted
fact-checking and quality review of the
numbers presented in the publication.
Public relations and marketing efforts

related to the report and its launch were
led by Katie Costello, Peter Kelley
and Sue Lavin Jones, with the help of
Greg Kelley from our external PR firm,
Feinstein Kean Healthcare.
Editing assistance
Russell Colton brought his incomparable
skills as a copy editor and proofreader to
this publication. His patience, hard work
and attention to detail were unparalleled.
Russ was assisted by Sue Brown.
69
Appendix
Data exhibit index

Biotechnology at a glance across the four established clusters, 2014 ............................... 5
FDA product approvals, 19962014 .............................................................................. 6
Since 2007, there has been a dramatic increase in the number
of US pre-commercial companies with market cap >US$1b........................................... 7
Growth in established biotechnology centers, 201314 .................................................15
EY Survival Index, 201314 ......................................................................................... 16
Revenues generated by US and European biotechnology
commercial leaders fuel investor sentiment ..............................................................17
Top 10 changes in US market capitalizations, 200914 .................................................18
Top 10 changes in European market capitalizations, 200914 .......................................18
US biotechnology at a glance, 201314 ........................................................................20
US pre-commercial companies with market cap >US$1b ................................................21
US commercial leaders, 201014 ................................................................................. 23
US commercial leaders and other companies, 201314 .................................................24
Selected US public company financial highlights by geographic area, 2014.....................25
US market capitalization relative to leading indices ........................................................26
US market capitalization by company size .....................................................................26
European market capitalization relative to leading indices ..............................................27
European market capitalization by company size ...........................................................27
European biotechnology at a glance, 201314 ..............................................................28
EU commercial leaders, 201014 .................................................................................30
European commercial leaders and other companies, 201314 .......................................30
Australian biotechnology at a glance, 201314 .............................................................31
Canadian biotechnology at a glance, 201314 ..............................................................32
Capital raised in the US and Europe, 200014 ...............................................................34
Innovation capital in the US and Europe, 200014.........................................................35
US and European early-stage venture investment, 200014 ..........................................36
US and European venture investment in early stage private companies holds steady .......37
US and European biotechnology IPO pricing, 201014 ..................................................38
US biotechnology financings, 200014 .........................................................................39
Quarterly breakdown of US biotechnology financings, 2014 ..........................................40
Innovation capital in the US, 200014 ..........................................................................40
70
Appendix
Innovation capital raised by leading US regions, 2014....................................................41

US biopharmaceutical venture capital rebounds to its
highest levels since the financial crisis .......................................................................42
Top US venture financings, 2014.................................................................................. 43
US biotechnology IPOs, 200014 ................................................................................. 44
The anatomy of a US IPO window ................................................................................. 45
US biotechnology IPO pricing by quarter, 201314 ........................................................45
Top US IPOs, 2014 ...................................................................................................... 46
European biotechnology financings, 200014 ...............................................................47
Innovation capital in Europe, 200014 ..........................................................................48
Quarterly breakdown of European biotechnology financings, 2014 ................................48
Innovation capital raised by leading European countries, 2014.......................................49
The return of European venture capital .........................................................................49
Top European venture financings, 2014........................................................................50
European biotechnology IPOs, 200014 .......................................................................51
Top European IPOs, 2014 ............................................................................................ 52
Performance distribution of 2014 NASDAQ biotech IPOs (in %) ......................................53
US and European M&As, 200714 ................................................................................56
Big pharma continues to command the most firepower, even as its
relative share of total firepower declines to an eight-year low ..................................57
US and European strategic alliances based on biobucks, 200714 ..................................58
US and European strategic alliances based on up-front payments, 200714 ...................58
Bid premiums for top 10 M&As, 200914 .....................................................................59
Selected M&As, 2014 .................................................................................................. 60
Alliances with big up-front payments, 2014 ..................................................................61
Big biobucks alliances, 2014 ........................................................................................ 62
US M&As, 200714 ..................................................................................................... 63
US strategic alliances based on biobucks, 200714 .......................................................64
US strategic alliances based on up-front payments, 200714 .........................................64
European M&As, 200714 ........................................................................................... 65
European strategic alliances based on biobucks, 200714 .............................................66
European strategic alliances based on up-front payments, 200714 ...............................66
71
Appendix
Global biotechnology contacts

Global Life Sciences Leader
Glen Giovannetti
glen.giovannetti@ey.com
+1 617 374 6218
Global Life Sciences Assurance Leader
Scott Bruns
scott.bruns@ey.com
+1 317 681 7229
Global Life Sciences Advisory Leader
Kim Ramko
kim.ramko@ey.com
+1 615 252 8249
Global Life Sciences Tax Leader
Mitch Cohen
mitchell.cohen@ey.com
+1 203 674 3244
Jeff Greene
jeffrey.greene@ey.com
+1 212 773 6500
Brisbane
Winna Brown
winna.brown@au.ey.com
+61 7 3011 3343
Melbourne
Denise Brotherton
denise.brotherton@au.ey.com
+61 3 9288 8758
Sydney
Gamini Martinus
gamini.martinus@au.ey.com
+61 2 9248 4702
Austria
Vienna
Erich Lehner
erich.lehner@at.ey.com
+43 1 21170 1152
Belgium
Brussels
Lucien De Busscher
lucien.de.busscher@be.ey.com
+32 2 774 6441
Brazil
So Paulo
Frank de Meijer
frank-de.meijer@br.ey.com
+55 11 2573 3383
Canada
Montral
Sylvain Boucher
sylvain.boucher@ca.ey.com
+1 514 874 4393
Lara Iob
lara.iob@ca.ey.com
+1 514 879 6514
Toronto
Mario Piccinin
mario.piccinin@ca.ey.com
+1 416 932 6231
Vancouver
Nicole Poirier
nicole.poirier@ca.ey.com
+1 604 891 8342
Czech Republic
Prague
Petr Knap
petr.knap@cz.ey.com
+420 225 335 582
Denmark
Copenhagen
Christian Johansen
christian-s.johansen@dk.ey.com
+45 5158 2548
Finland
Helsinki
Sakari Helminen
sakari.helminen@fi.ey.com
+358 405 454 683
France
Lyon
Philippe Grand
philippe.grand@fr.ey.com
+33 4 78 17 57 32
Paris
Virginie Lefebvre-Dutilleul
virginie.lefebvre-dutilleul@ey-avocats.com +33 1 55 61 10 62
Franck Sebag
franck.sebag@fr.ey.com
Global Life Sciences Transaction Advisory Services Leader

Australia
Germany
Greater China
Dsseldorf
Gerd Strz
gerd.w.stuerz@de.ey.com
+49 211 9352 18622
Mannheim
Siegfried Bialojan
siegfried.bialojan@de.ey.com
+49 621 4208 11405
Shanghai
Titus Bongart
titus.bongart@cn.ey.com
+86 21 22282884
Felix Fei
felix.fei@cn.ey.com
+86 21 22282586
Hitesh Sharma
hitesh.sharma@in.ey.com
+91 22 6192 0950
V. Krishnakumar
krishnakumar.v@in.ey.com
+91 22 6192 0950
Mumbai
India
+33 1 46 93 73 74
Ireland
Dublin
Aidan Meagher
aidan.meagher@ie.ey.com
+353 1221 1139
Israel
Tel Aviv
Eyal Ben-Yaakov
eyal.benyaakov@il.ey.com
+972 3 623 2512
Italy
Japan
Milan
Gabriele Vanoli
gabriele.vanoli@it.ey.com
+39 02 8066 9840
Rome
Alessandro Buccella
alessandro.buccella@it.ey.com
+39 06 67535630
Antonio Irione
antonio.irione@it.ey.com
+39 06 6755715
Hironao Yazaki
yazaki-hrn@shinnihon.or.jp
+81 3 3503 2165
Yuji Anzai
anzai-yj@shinnihon.or.jp
+81 3 3503 1100
Tokyo
Patrick Flochel
flochel-ptrck@shinnihon.or.jp
+41 58 286 4148
Korea
Seoul
Jeungwook Lee
jeung-wook.lee@kr.ey.com
+82 2 3787 4301
Netherlands
Amsterdam
Dick Hoogenberg
dick.hoogenberg@nl.ey.com
+31 88 40 71419
72
Appendix
New Zealand
Auckland
Jon Hooper
jon.hooper@nz.ey.com
+64 9 300 8124
Norway
Trondheim/Oslo
Willy Eidissen
willy.eidissen@no.ey.com
+47 918 63 845
Poland
Warsaw
Mariusz Witalis
mariusz.witalis@pl.ey.com
+48 225 577950
Russia/CIS
Moscow
Dmitry Khalilov
dmitry.khalilov@ru.ey.com
+7 495 755 9757
Singapore
Singapore
Sabine Dettwiler
sabine.dettwiler@sg.ey.com
+65 9028 5228
Rick Fonte
richard.fonte@sg.ey.com
+65 6309 8105
South Africa
Johannesburg
Warren Kinnear
warren.kinnear@za.ey.com
+27 11 772 3576
Spain
Barcelona
Dr. Silvia Ondategui-Parra
silvia.ondateguiparra@es.ey.com
+34 93 366 3740
Sweden
Uppsala
Staffan Folin
staffan.folin@se.ey.com
+46 8 5205 9359
Switzerland
Basel
Jrg Zrcher
juerg.zuercher@ch.ey.com
+41 58 286 84 03
United Kingdom
Bristol
Matt Ward
mward@uk.ey.com
+44 11 7981 2100
Cambridge
United States
Cathy Taylor
ctaylor@uk.ey.com
+44 12 2355 7090
Rachel Wilden
rwilden@uk.ey.com
+44 12 2355 7096
Edinburgh
Mark Harvey
mharvey2@uk.ey.com
+44 13 1777 2294
Jonathan Lloyd-Hirst
jlloydhirst@uk.ey.com
+44 13 1777 2475
London/Reading
David MacMurchy
dmacmurchy@uk.ey.com
+44 20 7951 8947
Ian Oliver
ioliver@uk.ey.com
+44 11 8928 1197
Boston
Michael Donovan
michael.donovan1@ey.com
+1 617 585 1957
Chicago
Jerry DeVault
jerry.devault@ey.com
+1 312 879 6518
Houston
Carole Faig
carole.faig@ey.com
+1 713 750 1535
Indianapolis
Andy Vrigian
andy.vrigian@ey.com
+1 317 681 7000
Los Angeles
Don Ferrera
don.ferrera@ey.com
+1 213 977 7684
anthony.torrington@ey.com
+1 732 516 4681
David De Marco
dave.demarco@ey.com
+1 732 516 4602
Kim Letch
kim.letch@ey.com
+1 949 437 0244
Mark Montoya
mark.montoya@ey.com
+1 949 437 0388
Steve Simpson
stephen.simpson@ey.com
+1 215 448 5309
Howard Brooks
howard.brooks@ey.com
+1 215 448 5115
Raleigh
Mark Baxter
mark.baxter@ey.com
+1 919 981 2966
Redwood Shores
Scott Morrison
scott.morrison@ey.com
+1 650 496 4688
Chris Nolet
chris.nolet@ey.com
+1 650 802 4504
New York/New Jersey Tony Torrington
Orange County
Philadelphia
San Diego
Dan Kleeburg
daniel.kleeburg@ey.com
+1 858 535 7209
Seattle
Kathleen Smith
kathy.smith@ey.com
+1 206 654 6305
Washington, D.C.
Rene Salas
rene.salas@ey.com
+1 703 747 0732
73
EY | Assurance | Tax | Transactions | Advisory

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Our Global Life Sciences Sector brings together a worldwide
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For more timely insights on the key business issues affecting life
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Section heading

Biotechnology Industry Report 2015

Beyond borders Biotechnology Industry Report 2015

Beyond borders Biotechnology Industry Report 2015

The year in review

The European biotechs strategic decision: list in Europe or the US?

The big picture

The big picture

The big picture

Data exhibit index

The year in review

Beyond borders 2015

The year in review

Beyond borders Biotechnology Industry Report 2015

The year in review

The view from the top

It was also a landmark year for new

Biotechnology at a glance across the four established clusters, 2014

Public company data

Net income (loss)

Numbers may appear inconsistent because of rounding.

Against a backdrop of booming stock

Beyond borders Biotechnology Industry Report 2015

The year in review

R&D spending increased by 20% very

Net income skyrocketed 231% to

The US sector had one of its best

FDA product approvals, 19962014

Biologic license applications

Beyond borders Biotechnology Industry Report 2015

The year in review

While most of the growth came from US

Since 2007, there has been a dramatic increase in the number of US

of about two-thirds of companies. Net

Only therapeutics companies are included.

Global R&D spending increased by 20%

Beyond borders Biotechnology Industry Report 2015

The year in review

Venture capital increased by 28% to

For the second year in a row, the

Beyond borders Biotechnology Industry Report 2015

The year also brought good news for

The year in review

On the alliance front, biotech companies

In a sign of the increased bargaining

Beyond borders Biotechnology Industry Report 2015

The year in review

Life of a start-up CEO:

CEO, Editas Medicine

also advice on what steps to take now to

Beyond borders Biotechnology Industry Report 2015

issue in detail. To get the most out of my

The year in review

CEOs need to create a narrative that

because its easy. Still, the CEO must

a longer financial runway. It is more

Im always planning two or three financing steps

Beyond borders Biotechnology Industry Report 2015

The year in review