2019 saw a new record set for a list price of a prescription therapy—$2.1 million for the gene therapy Zolgensma launched by AxeVis, a Novartis Company—and resulting renewed concerns over the price of treatments and whether politicos will ever be able to address the issue as the nation’s presidential election campaign season heats up.
Also renewed in 2019 was hope that a first treatment indicated for reducing clinical decline in people with Alzheimer’s disease may finally be approved, perhaps as soon as 2020—as well as the ongoing legal wrangle over who invented CRISPR-Cas9, thanks to a second interference proceeding now winding its way through the Patent Trial and Appeal Board.
Also “new” heading into 2020 is a wave of consolidation among gene therapy contract developers and manufacturers; and new concerns among investors as both mergers and acquisition activity and venture capital investment slow down (yet remain strong compared to some recent years), reflecting a cooling of financial markets also reflected in postponement of some IPOs, one of which was launched after being scaled down significantly.
Below is a list of eight biopharma-related trends cited by experts and others with a stake in the industry, as articulated in interviews with GEN, or in reports and other public statements.
President Donald Trump and Congressional leaders of both parties seem to have found common ground on one issue: All have jawboned in recent years about the need to curb rising prices for prescription drugs. Whether all that talk will translate into any action will depend on who wins the White House and Congress in November.
“The best-case scenario if we really want to regulate drug pricing is if we had a Democratic Congress and a Democratic legislature. Outside of that, I think we are going to have some changes, but I think it’s going to be a lot slower,” Astrid Kurniawan, an analyst with Informa Pharma Intelligence, told GEN. “If we have a split, say a Republican president and a split Congress, I think that it’s going to be like how it has been lately: We haven’t really been able to pass anything.”
U.S. House of Representatives Speaker Nancy Pelosi (D-CA) in October unveiled a bill allowing the program to negotiate prices for 250 branded treatments, at a projected savings to Medicare of $345 billion over 10 years, according to the Congressional Budget Office. Congressional Republicans dismissed Pelosi’s plan as “pushing a socialist proposal to appease her most extreme members.”
In the U.S. Senate, Finance Committee Chairman Chuck Grassley (R-IA) and ranking member Ron Wyden (D-OR) in July introduced their “Prescription Drug Pricing Reduction Act of 2019” that would cap out-of-pocket expenses for Medicare beneficiaries at $3,100, and subject biopharmas to penalties if price increases for their drugs exceeded inflation.
Republicans have countered that Trump’s administration has tried to contain drug prices, only to encounter resistance. In May, the U.S. Department of Health and Human Services (HHS) issued a rule requiring biopharmas to disclose their drug prices in TV ads. A month later, Amgen, Eli Lilly, and Merck & Co. sued HHS, and U.S. District Judge Amit Mehta blocked the rule.
Mergers and Acquisitions (M&A)
The first three quarters of 2019 saw 242 mergers and acquisitions (M&A) deals for a combined value of $195 billion, according to Informa Pharma Intelligence. More than two-thirds (70%) of that combined value—$137 billion—came from just two deals. Bristol-Myers Squibb (BMS) on November 20 completed its $74 billion acquisition of Celgene. Five months later, AbbVie agreed to buy Allergan for $63 billion, a deal set to close in early 2020.
“There’s always going to be a baseline of M&A. It’s just part of doing business in the biopharma industry. There’s nothing to suggest that the baseline is going to decrease during next year,” Dan Chancellor, a principal analyst at Informa Pharma Intelligence, said in an interview. “Drug spend continues to rise. We had tax reform passed in the U.S. at the end of 2017, so you get better value now with repatriating foreign cash, and companies spending that on M&A star deals is a good way of doing that.”
Chancellor said drivers of M&A deals include a desire by biopharmas to source about half of their drug pipelines externally rather than through internal R&D—especially for candidates further along in development: “M&A isn’t necessarily the best way to buy a preclinical or a Phase I pipeline, but it is certainly a good way to buy revenue streams or late-stage drugs, especially if they perhaps have just gained approval, and they need a commercial partner to maximize value.”
Gene therapy CDMOs
Speaking of M&A, 2019 saw two blockbuster acquisitions that consolidated the number of contract development and manufacturing organizations (CDMOs). Both were carried out by buyers seeking to expand their gene therapy manufacturing capabilities as the first treatments win approvals and reach the market: Thermo Fisher Scientific snapped up Brammer Bio for $1.7 billion in a deal completed May 1, while Catalent bought Paragon Bioservices for $1.2 billion in a deal completed May 20.
More such acquisitions can be expected in 2020. Chancellor of Informa Pharma Intelligence noted that the top five CDMOs only accounted for 15% of total activity in that business segment, compared with more than half the total activity generated by the top five clinical research organizations (CROs)—an insight he said was recently shared during a panel discussion at the CPhI Worldwide conference, held November 5–7 in Frankfurt, Germany.
“Our panelists suggested we may be seeing more activity through the next year or two,” Chancellor said. “It’s unlikely that the biggest CDMOs will be buying all of the little ones. It’s more likely that the medium-sized CDMOs will add to their businesses by acquiring the smaller ones. And the big CDMOs will acquire the medium ones.”
One key area of drug development for which answers are expected to emerge in 2020 is in Alzheimer’s disease. In October, Biogen surprised many market analysts by announcing that it plans to file for FDA approval of the Alzheimer’s candidate aducanumab, being co-developed with Eisai, despite halting two failed Phase III studies of the drug in March.
Biogen and Eisai now assert that one of those trials, the EMERGE Study (NCT02484547) met its primary endpoint showing a significant reduction in clinical decline—a result the companies now say is supported by results from a subset of patients in the other halted Phase III study, ENGAGE (NCT02477800).
Investors responded to the planned FDA filing with a buying surge that sent Biogen’s stock price zooming 26% on October 22, to $281.87. That surge, in turn, lifted the prices of most biopharma stocks into November.
Venture capital deals
Venture capital (VC) financing continued to flow to early-stage companies, including freshly spun-out startups, in the most recent third quarter of 2019. However, while the number of deals stayed steady compared with Q3 2018, the dollar value of those deals has slipped noticeably when Q1–Q3 2019 is compared with a year earlier—a trend expected to continue as rates of economic growth slow in the United States, Europe, and Asia.
According to the quarterly MoneyTree Report, compiled by PwC and CB Insights, the first nine months of this year saw financings totaling $9.461 billion—down 25.5% from January–June 2018—even as the 457 deals reported for Q1–Q3 2019 showed a 1% increase from 452 a year earlier.
The reason for that discrepancy appears to reflect a jump in the value, though not the number, of early-stage financings. In the “biotechnology” industry category, during the third quarter of this year, early-stage financing jumped 36% in dollar value to $536 million from $393 million in Q3 2018—even though the number of deals stayed steady at 19. But that quarter masks an overall nine-month year-over-year slide, in which the aggregate deal value from January–September 2019 tumbled 27% to $1.625 billion from $2.228 billion in the first nine months of 2018, while the number of deals fell 9% to 60 from 66.
CRISPR legal wrangle
The bitter legal wrangle over who invented CRISPR-Cas9 genome editing in eukaryotic cells may be history soon: “The parties have discussed settlement, and have made a good faith effort to settle the interference, but no agreement has been reached at this time,” Raymond N. Nimrod of the law firm Quinn Emanuel Urquhart & Sullivan, representing The Broad Institute, disclosed in a November 18 filing to the Patent Trial and Appeal Board (PTAB).
The PTAB declared a patent interference in June between 10 separate U.S. Patent applications owned by the University of California (UC), the University of Vienna, and CRISPR pioneer Emmanuelle Charpentier, PhD, director and scientific member at the Max Planck Institute of Infection Biology, Berlin—and 13 of the 15 patents held by the Broad Institute, Harvard University, and MIT, plus one patent application.
“It has led to confusion about what sort of licensing people need in order to commercialize the technology. But I don’t think there’s people sitting on the sidelines, waiting for the legal battle really to get done,” Eric Rhodes, CEO of ERS Genomics, said in an interview.
Lisa A. Haile, JD, PhD, a partner with the law firm DLA Piper in San Diego, told GEN the patent dispute presents an opportunity for the parties to resolve the issue through a licensing model.
“Right now, some of my clients are confused: Do we go to UC? Do we go to Broad? What licenses do we really actually need?” Haile said. “So many of them are taking both licenses, just because it’s a big question mark as to how the patent landscape is going to fall out. I have gone to both entities for licenses for my clients.”
Genome editing adoption
Adoption of genome editing is accelerating, Rhodes said, as the technology finds broader usage beyond traditional human drug development.
“What’s new or more exciting, I think, is in areas where you probably hadn’t seen much use of gene editing, or even gene control before—areas like livestock, animal health, companion animal health, as well as livestock,” Rhodes said. He cited Recombinetics, a company that has applied livestock gene-editing and associated technologies to create a pipeline of animals usable in biomedical research, regenerative medicine, and animal agriculture.
ERS, he said, is making a big push into the companion animal space. “We’re finding that historically, a lot of drugs for animals are developed in the course of developing drugs for humans,” Rhodes said. “Some of the more exotic approaches like cell therapies, gene therapies that are being used in humans, are now being adopted toward companion animals as well.
As for human therapeutics, Rhodes added, users of gene editing are increasing their focus on the efficiency of the cutting, specifically minimizing off-target effects that have always been a concern: “If you’re doing a gene therapy or even just a cell therapy approach, you have to be concerned about whether or not the targeting that you’re doing in the cells is really efficient.”
A prime example of how genome editing has expanded beyond CRISPR-Cas9 is the launch of Prime Medicine by co-founders that include David Liu, PhD, of the Broad Institute of MIT and Harvard. Liu and colleagues dazzled the genome editing community in October when they detailed a new mechanism for genome editing called prime editing that does not make double-strand breaks in the target sequence or use a donor DNA template.
Liu is among co-founders now working to commercialize the technology through their startup, aptly named Prime Medicine. In October, Prime granted an exclusive license to Beam Therapeutics—whose co-founders include Liu—to develop prime editing technology for creating or correcting any single-base transition mutations, as well as for the treatment of sickle cell disease, both of which Beam is already pursuing with its base editing technology.
Prime retains rights to the technology in other applications: “It is possible that this gene editing technology developed by Liu’s group is competitive with our business, and it is also possible that such gene editing technology may potentially be considered more attractive than base editing,” Beam cautioned in its S-1 registration statement for its initial public offering. “Therefore, Prime Medicine may pursue this technology in other fields and for other applications and may develop competing products using such technology.”