2021 Biopharma Outlook: Turning Uncertainty Into Opportunity
Source : IN VIVO
A singular focus on defeating COVID-19 will likely dominate the biopharma agenda at the beginning of 2021 and will determine how quickly the industry, and world, can bounce back to something like normalcy. New digital capabilities and learnings will continue to emerge as the pandemic ebbs, and strong industry balance sheets will keep the deal volume moving, according to experts and executives.
The year 2020 was chaotic, to put it charitably. It was a year that makes gazing into a happier future – past the COVID-19 related suffering and hardship, past continuing racial injustice, past the political and environmental onslaught – something of a welcome respite. Our problems are far from solved, making optimism sometimes difficult to muster and a happier future challenging, at times, to picture. And yet, there are strong reasons to believe that hard work, collaboration and perseverance will help to ameliorate our present situation; witness the grit displayed by essential workers, the unprecedented cooperation and speed of research happening in the scientific community, and the tireless activism of Black Lives Matter. We have been down in 2020, but we are far from out.
In fact, a closer look reveals a myriad of positive responses to our current crisis, and new developments that will shape the global health care ecosystem for years to come. In the realm of health care’s plodding digital transformation, necessity became the mother of transition. The biopharmaceutical innovation engine – and the fundraising that fuels it – did not sputter, despite a flagging economy. Corporate culture, diversity and inclusion gained a renewed focus and vigor, and turned into a strategic imperative. And the race to find a safe and effective vaccine for COVID-19 brought academics, drug developers, regulators and other stakeholders together, shaving years from the standard vaccine development timeline.
Many challenges remain. At a macro level, shifting global trade policy and the 2020 US election bring new uncertainties. With the arrival of winter, COVID-19 case numbers and deaths are ticking up, brightening the spotlight on vaccine and therapeutics developers, and dimming the hope for a speedy economic recovery. Even so, 2021 will be a year of striking opportunity for the biopharmaceutical industry. New gene and cell therapies will stimulate deal activity and become available to patients, along with new pricing models; early stage cancer detection diagnostics could upend cancer care; and new treatments for rare diseases will address staggering unmet needs. And of course, the whole world is watching the development of COVID-19 vaccines, the handling of which could make or break biopharma’s reputation.
It is hard to understand how the decision to wear a mask turned into a political statement, and much has been said and written about the public’s responsibility – or irresponsibility – in slowing the spread of the SARS-CoV-2 virus. “Everybody knows that pestilences have a way of recurring in the world: yet somehow we find it hard to believe in ones that crash down on our heads from a blue sky,” wrote Albert Camus in The Plague, his 1947 novel about the social dilemmas inherent to combatting an infectious and deadly disease. Vaccine manufacturers and distributers – assuming that a vaccine is authorized or approved by regulators before the start of 2021 – will face challenges beyond the supply and logistics of access and delivery, including the need to overcome “vaccine hesitancy” among skeptical consumers.
Next year will be a “tale of two cities,” meaning that what happens during the first half of 2021 will determine how different the second half of the year will be, said Arda Ural, Americas industry markets leader, health sciences and wellness, at Ernst & Young. “The number one area of uncertainty for next year will be the prevalence of COVID-19.” The longer that high prevalence rates last, the more negative impacts will radiate outward across individuals and the economy. “Twenty-five million Americans are receiving government assistance, and 10 million have lost their jobs,” said Ural. If the virus lingers, more people will lose insurance coverage, more will go undiagnosed, and more will lose affordable access to medications. “There will be some downstream impact on the life sciences industry, depending on loss of insurance,” he said.
Strategic planning will be critical for managing COVID-19 vaccines, therapeutics and other products as well. “It’s about how can organizations forecast the surge and decline at a rapid pace heading into the future,” said Karen Young, US health industries leader at PwC. Industry CEOs will need modeling and forecasting tools akin to a flight simulator, to successfully run their businesses, said Young. A “CEO simulator” can bring agility and nimbleness to business decisions, incorporating surveillance systems to predict business portfolio performance and diversification, and supply and demand.
The FDA issued more than 300 Emergency Use Authorizations (EUAs) for diagnostics, therapeutics, personal protective equipment and other medical devices between February and September of 2020, noted Young, compared with a total of 24 EUAs between 2010 and 2019. “The scale in what has occurred during this eight-month period definitely will show a stickiness in how trials will be run,” said Young, adding that 11,000 trials are listed as using connected digital products or remote data collection. “Transparency has become front and center, and that collaboration will start to evolve into something that hopefully will improve the trust factor in our industry. Gaining trust among recipients of a COVID-19 vaccine will require a transparent, five-pronged approach between manufacturers, regulators and policymakers, including trial methodology, standard of accountability, data, side effects and regimen,” said Ural. “Then it becomes a change management and educational effort.”
Although many sectors have been hard hit by COVID-19, strong liquidity and balance sheets in the biopharma industry have provided a degree of stability in very unstable times. That strength reflects the life sciences’ “innovation for change” focus, which is part of the new economy, said Adam Lohr, a partner and senior analyst for the life sciences industry at RSM, a professional services firm. “As a country, the US is moving away from energy and industrials, and moving toward very highly technical products, whether its financial services, technology or life sciences … that is the direction that the economy is moving, and the returns are significantly better there.”
Interest rates are likely to stay near zero for years to come, which stimulates investment. “People are looking out on the long run, and investment in life sciences allows people to get an above average return over an extended period of time, without being susceptible to short term volatility,” said Lohr. “It’s striking how functional the financing markets have been,” said Michael Gaito, global head, healthcare investment banking, at JP Morgan, during a Demy Colton virtual salon on 29 September 2020. The first half of 2019 saw an all-time high in global fundraising, and the first half of 2020 was even higher than 2019, said Gaito. At JP Morgan, 2020 fundraising had outpaced the full year of 2019 by the end of the third quarter, including $18bn from IPOs, and $50bn in follow-ons, he said.
Ural said his colleagues working in E&Y’s venture capital group are seeing “significant oversubscription in IPOs, even with preclinical assets, which is unheard of … Liquidity is driving a lot of that valuation, so it’s a great time to be a biotech innovator.” Innovation is also driving deal activity; the FDA had approved 42 New Molecular Entities (NMEs) by early November, compared with 48 NMEs during the full year of 2019. That level of innovation means that “biotech or midsize pharms who are innovating will be acquired as a bolt-on,” said Ural. “That trend will continue, because big pharma requires that innovation to replenish its aging portfolio.” Gaito at JP Morgan also noted high premiums in mergers and acquisitions (M&A), and predicted “robust M&A activity into 2021.”
Following the death of Breonna Taylor from a police gunshot in March 2020, and the death of George Floyd under the knee of a police officer in May, the Pharmaceutical Research and Manufacturers of America (PhRMA), like many organizations around the country, spoke up. ‘Systemic Racism Is As Real As Any Disease. Our Industry Is Not Immune,’ said the headline of a PhRMA print ad launched in July. ‘Diversity is essential to a robust innovation ecosystem that can create new medicines for those who need them,’ the ad continued. Last January, BIO launched its first annual Measuring Diversity in the Biotech Industry: Building an Inclusive Workforce report. The report, based on survey data from 98 companies, illustrated the need for stronger gender parity and racial and ethnic representation in the biotech workforce.
In an interview with In Vivo, Percival Barretto-Ko, president of Astellas Pharma US Inc., said, “COVID truly unraveled a lot of deep-rooted issues around not just racial inequality, but racial injustice and health care inequities in society.” Ethnic and racial minority groups have been disproportionately impacted by COVID, due to overrepresentation among essential workers, discrimination in housing and healthcare access, inequities in education and other factors. Barretto-Ko said Astellas makes an effort to understand the issues patients face every day, “not just out of pocket costs, but also access to medicines.” He cited prostate cancer as a “good example of health care inequities that exist particularly among African-American men, all the way from diagnosis to treatment.” Astellas co-markets Xtandi (enzalutamide) with Pfizer Inc., which is indicated for prostate cancer. “The way that we approach this disparity is to do an audit ourselves of what exactly we as an organization are doing to address those inequities.”
Astellas established a diversity and inclusion (D&I) council “several years back,” composed of over 30 leaders across the global Astellas organization. “Over the last year, we’ve really focused on understanding metrics, and really looking at our HR systems to understand the number of promotions, the rate of promotions, the rate of recruitment, and terminations as well, both voluntary and involuntary. As a science and data-driven organization, it’s important for us to know the status,” Barretto-Ko said. Astellas developed a three-year people strategy based on three pillars for talent: attract, retain and develop. Under each of those workstreams, “we have strategic imperatives and tactics from establishing deep relationships with historically black colleges and with professional organizations to track talent, to talent review and mentorship and sponsorship of people of color and diverse populations within Astellas,” he said.
There is hope that a shift toward increasingly virtual or decentralized trials will increase racial diversity in clinical trial enrollment, a critical issue for research. Diversity among clinical researchers is important too – just as police forces work better when they reflect the communities they serve, diverse trial investigators can help build trust and participation rates among people in underserved communities, said Bristol Myers Squibb Company chair and CEO Giovanni Caforio, during PwC’s 180 Health Forum. BMS’s foundation pledged $100m over the next five years to train and develop 250 racially and ethnically diverse clinical investigators.
D&I initiatives are being built into the fabric of the employers, said Lohr at RSM. “More women are coming up through the STEM programs in our academic institutions, and we’ll probably see that in hiring over the next couple of years,” he noted. “There are funds that invest only in companies that have a diverse board of directors, because they out-perform their non-diverse peers,” he said. Investment groups committed to company diversity as a prerequisite for funding include Plum Alley and Astia, and financial institutions such as Goldman Sachs and Softbank are providing funding for funds specifically for female-led companies and entrepreneurs of color.
Despite a change of administration in the Executive Branch, the 117th Congress will remain divided when it convenes for the first time in January 2021, with Democrats maintaining control of the House of Representatives, and Republicans holding the Senate. A divided Congress provides a check on the ambitions of a single party, which is preferable for most businesses.
By Ben Comer