SAN DIEGO – The Biotechnology Innovation Organization's (BIO) International Convention, which runs June 19-22, returns to the thriving southern California biotechnology hub of San Diego just three years since it last hosted the giant event in 2014. The meeting allows a chance for industry leaders to take stock of progress that has been made to date. Overall, it appears that the report card is good. The biopharmaceutical sector, despite some major challenges in the intervening years, is continuing to generate support from investors, and that is reflected by the 10 percent growth in the BioWorld Biopharmaceutical Index in that period, and the almost $140 billion collectively raised by public and private companies to fuel their product development activities.

However, it has been a bumpy ride for the sector. The famous Dickens quotation, "It was the best of times, it was the worst of times," aptly sums up its performance since BIO 2014 was held.

The BioWorld Biopharmaceutical Index hit a record high, up more than 36 percent, a month after BIO 2015 convened in Philadelphia and the collective market caps of public companies hovered around $1 trillion. Gilead Sciences Inc., for example, reached a market cap of $175 billion and Amgen Inc.'s market cap stood at $120 billion.

Unfortunately, that high point for the industry was quickly forgotten in the months that followed BIO 2015, as the sector ran into some major turbulence when the cost of innovative drugs become a key item on the political agenda. (See BioWorld Insight, Oct. 5, 2015.)

By the time BIO 2016 rolled around in San Francisco, all those gains had been erased and the mood heading into last year's meeting was decidedly pensive, with a number of issues top of mind, including drug pricing, the mounting costs of R&D and decreasing innovation in terms of new drugs being approved. The industry's collective market cap had also slipped to $725 million and Gilead had ceded its number one spot in terms of market capitalization to Amgen. (See BioWorld Biopharmaceutical Index BIO14-BIO17, below.)

Drug developers have also seen their valuations whipsaw dramatically since the end of June 2014. The BioWorld Drug Developers Index has followed a similar trajectory to their blue chip colleagues oscillating between a 40 percent rise in value to a 30 percent reversal in fortunes, with emerging R&D-focused companies taking the brunt of the ongoing drug pricing debate. However, after touching that low point, the index has seen a remarkable recovery regaining its losses and climbing back into positive territory. (See BioWorld Drug Developers Index BIO14-BIO17, below.)

On an upswing

The 16,000-plus delegates attending BIO 2017 this week will certainly be in a more positive mood as the sector appears to have got its groove back once again. In the 12 months since BIO 2016, the Biopharmaceutical index has climbed in value almost 10 percent and the Drug Developers index an even more dramatic 38 percent. (See BioWorld Biopharmaceutical Index BIO15-BIO16 and BioWorld Drug Developers Index BIO15-BIO16, below.)

The upswing has been driven by investors being attracted back into the space thanks to companies posting solid first-quarter 2017 financial returns and projecting a bullish period for their drug sales for the rest of the year.

Also helping the sector has been the strong performances of the general markets over the past year, with the Nasdaq Composite hitting record highs and gaining 28 percent and the Dow Jones Industrial Average up about 18 percent in the same period.

Along the way, the exciting developments in immuno-oncology, gene editing and gene therapy, which are paving the way for new approved medicines, continue to keep investors engaged.

The sector's investments to discover new technologies looks as though it is also back on track to make up for its poor return when only 22 new molecular entities (NMEs) received the FDA's green light in 2016, the fewest number for five years. However, in the first quarter of this year, 12 NMEs were approved, outperforming comparable periods since 2013.

At that pace, the industry could be on target to beat the record total of 45 new medicines that were approved in 2015. (See BioWorld Insight, Dec. 27, 2016.)

Breaking down the data between the BIO conventions, in the 12 month period since BIO 2016, 29 NMEs have been approved by the FDA, compared to 45 between BIO 2015 and BIO 2016, and 38 new medicines between BIO 2014 and BIO 2015.

While the total approval of 112 new medicines in three years is not a bad haul, it is a number that can be improved upon. There are several sessions at this week's meeting devoted to improving on research and development, clinical trial design and regulatory oversight – measures that can speed more novel medicines to patients.

By the numbers

Despite the uncertainties on the capital markets during the past three years, public and private biopharma companies have had no difficulty raising capital – almost $139 billion, in fact. (See Biopharma Fund Raising, right.)

Of that total, approximately 60 percent was generated by public offerings, including follow-on financings and IPOs.

In fact, biotech IPOs have heated up of late. To date, 14 biopharma companies have successfully closed their IPOs on U.S. markets this year, generating $1.1 billion, according to BioWorld.

Since BIO 2014, no fewer than 132 companies have closed their IPOs on U.S. markets and a further 40 firms have completed IPOs elsewhere, bringing the total amount raised in that period to more than $17.4 billion, or an average deal size of $101 million.

In the 12 months since BIO 2016, the sector has raised a massive $50.5 billion comparable to $51 billion raised in the 12 months leading up to BIO 2015.

Those data demonstrate that delegates to this year's meeting have every reason to smile – investors appear to be onside, capital is flowing to support research and development and new medicines are reaching the market. However, there are still challenges to be faced, including the thorny issue of drug pricing, which continues to create headwinds for the sector.