SAN FRANCISCO – A great deal has changed since the Biotechnology Innovation Organization's (BIO) International Convention was last held in San Francisco some 12 years ago in 2004. One obvious change is that BIO returns sporting a brand new name designed to reflect the remarkable progress and groundbreaking innovations its members achieve in healing, fueling and feeding the world, the trade association said when the new name came into being at the beginning of the year.

"This name change does not alter our mission or the value we deliver," BIO president and CEO Jim Greenwood said in an official announcement. "We are better describing what our members do, who they are and how they think. Our name and identity need to reflect the accelerating sense of improvement and discovery our members are helping to lead."

There is no doubt the winds of change are pervading all aspects of the biopharmaceutical industry these days, which is responding to a variety of issues, including drug pricing, the escalating costs of R&D, the efficiency of clinical trials, precision medicine and big data, topics that the 16,000-plus delegates that are convening in the birthplace of the sector will be discussing this week.

MOOD SWING

The mood has also changed this time around compared to one year ago when BIO 2015 convened in Philadelphia. The sector was buoyant back then, with the industry heading into the meeting on a record-setting high; in the previous 12-month period, since BIO 2014 was held in San Diego, the biopharma industry had raised more than $43 billion globally, of which 62 percent came from public offerings, including IPOs. Company valuations had never been higher, with their collective market caps hovering around $1 trillion. Gilead Sciences Inc., for example, had reached a market cap of $175 billion and Amgen Inc.'s market cap stood at $120 billion.

It was a high point for the industry that investors were soon to forget 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.)

At the time, the issue was enough to wipe $40 billion off the sector's total market cap in the space of a few days. Although the industry's valuation recovered from that low point in the third quarter of 2015, it suffered a further precipitous drop in the first quarter of 2016 caused by a confluence of factors, including a broader equity market correction and lingering concerns about global growth and an economic downturn.

The BioWorld Biopharmaceutical Index fell 20 percent in value in the quarter – probably its worst start to a year for almost 20 years. In the 12 months since BIO 2015, the index is down around 18 percent. (See BioWorld Biopharmaceutical Index BIO15-BIO16, below.)

There has also been a dramatic change in fortunes for Gilead, of Foster City, Calif., normally a solid biopharma favorite with investors, which has seen its share value fall more than 25 percent since the end of the second quarter of 2015, a big enough drop for the company to surrender its coveted number one spot, a position it had held for about three years, to Amgen in terms of market cap. At the end of May, Amgen had a market cap of $118 billion, just ahead of Gilead at $115 billion. The sector as a whole had a combined market cap of $773 billion, a drop of about 23 percent in the span of just one year.

Drug developers have also seen their valuations decline dramatically since the end of June 2015. The BioWorld Drug Developers Index has fallen a whopping 42 percent in that period, making it the worst performing sector. By contrast, the general markets have remained relatively flat during that period, with the Nasdaq Composite index down almost 1 percent and the Dow Jones Industrial average up 1 percent. (See BioWorld Drug Developers Index BIO15-BIO16, below.)

There is no doubt that the drug pricing debate has kept biotech investors on the sidelines. The prevailing policy and market landscapes are causing biopharmaceutical companies to rethink ways in which to do a better job of how they define and communicate the value of their products.

BY THE NUMBERS

Despite the swoon on the capital markets, public and private biopharma companies have had no difficulty raising capital. In the 12 months since BIO 2015 the sector has raised $51 billion. That compares to $37 billion raised in the 12 months leading up to BIO 2015. (See Biopharma Fund Raising, right.)

Driving that 38 percent jump was venture capital and follow-on financings. The industry typically raises around $4 billion in venture capital annually, or about $1 billion each quarter. In the period between BIO conventions, there was a tsunami of capital flowing to private companies to the tune of $9.7 billion, a 33 percent increase over the comparable year-earlier amount raised.

The ability of private companies to raise capital will be one of the topics covered in a Monday session at BIO 2016. Titled "State of the Innovation Industry & Drivers of Forecasting Success," the session will examine findings from a report on emerging therapeutic company trends over a 10-year period across six areas: venture funding, public investment (IPOs and follow-ons), licensing, M&A and the clinical pipeline (partnered vs. unpartnered). It found that 2015 was the best year on record for U.S. venture capital, with just under $7 billion raised. Funding of immuno-oncology and neurodegenerative disease companies helped drive this all-time high. (See Capital continues to flow toward immuno-oncology companies, in this issue.)

Editor's Note: See BioWorld Today for coverage of BIO 2016.