PHILADELPHIA – Record new molecular entity approvals, record venture capital financings, record Chinese investments and record research-stage acquisitions all leave biopharma executives attending the Biotechnology Innovation Organization's international convention with one pressing question.

What's next for innovation?

While 2018 was a stellar year for the industry, it is not a predictor for a perfect future, and current numbers indicate 2019 is not on target to hit the record levels of last year. Yet panelists at a Super Session on Monday afternoon suggested a number of ways to stay ahead of the innovation wave, such as focusing on digital technologies and tools, as well as cell and gene therapies, and presenting investors not only with a clear understanding of mechanism, but the ability to see beyond present opportunities and into expanded market potential.

"I think what you're going to see is a revolution in the data that allows you to actually understand what's going on at a biological level," said Benjamin Thorner, senior vice president and head of business development and licensing for Merck & Co. Inc., of Kenilworth, N.J. "If we look backwards, we have a number of medicines that have had an impact on patient's lives, but I think we're really at the dawn of being able to understand how all of these mechanisms actually work inside the human body. And I think the tools that we have today, whether they be computing tools or whether they be biological tools, just unlocks an extraordinary opportunity for developing new therapeutics."

David Thomas, BIO's vice president of industry research, reported on the organization's 5th annual report on emerging company trends, which included data sourced from Clarivate Analytics, the parent company of BioWorld. The industry hit several records in 2018, including the 59 new molecular entities approved by the FDA. Thomas said he expects this year to "not be as high as last year," maybe around 40, based on the 11 already approved so far. The approvals consist mostly of small molecules as opposed to large molecules, although the second gene therapy reached U.S. approval just a few weeks ago.

As for clinical pipelines, there are currently almost 7,000 ongoing drug programs with 73% of them coming from small companies, he said. Since BIO 2018 in Boston, the industry has netted 305 new programs, most focused on oncology, although the metabolic space experienced the highest year-over-year gain of 20%.

Sam Ulin, a managing director with Newton, Mass.-based Clearview Healthcare Partners, said the huge interest in oncology is mainly driven by CAR T therapies. "From our vantage point, a lot of opportunity is outside of oncology," Ulin said. "Companies working outside of oncology are still driving tremendous value."

Public funding, including a total 47 biotech IPOs in 2018 tracked by BIO, showed an end-of-year market capitalization average of $710 million, according to Thomas. That compared with a $428 million average 10 years ago.

It was also a record year last year of $43 billion for research-stage acquisitions, Thomas said, with a handful making up the bulk of the money, including Celgene Corp.'s acquisition of Juno Therapeutics Inc. for $9 billion, Novartis AG's takeover of Avexis Inc. for $8.7 billion, Sanofi SA's buyout of Ablynx NV for $5.1 billion and Novartis AG's purchase of Endocyte Inc. for $2.1 billion. Thomas noted that the volume of deals has decreased, meaning the average acquisition cost for a phase III company has risen significantly.

Venture capital poured $17.5 billion in therapeutic-only companies last year, with the top 15 venture raises in the U.S. each bringing more than $100 million for $3.5 billion total. For ex-U.S., almost all of the top 15 raised above $100 million, and 10 of them came "out of China," Thomas said. "That's where we see some of the largest venture rounds for ex-U.S."

China was only 1% of the ex-U.S. venture capital in 2009, compared with 47% in 2018, and a large amount of the money is going into preclinical-stage companies.

Series A financings globally in 2018 raised the highest amount ever, Thomas said, and there have been significantly more licensings – 29 in total – rising above $1 billion than ever before.

Broken down, those deals include 13 for monoclonal antibodies, seven for small molecules, nine for monoclonal antibodies/bispecifics, five for antisense therapeutics, five for RNAi, five for cell therapy, and the rest for peptides, protein conjugation, mRNA, gene editing, gene therapy and others.

Ulin said that the willingness a few years ago to bet on differentiated technologies, such as cell therapies and genome editing technologies, did not really exist, "whereas today, it is arguably the single biggest driver of investment. People aren't shy, at least in today's capital market, about supporting those investments."

A half dozen years ago, it was "difficult to engage in partnering an immuno-oncology asset," Thorner said, but once the promise was evident, it led the industry to invest dramatically in "something that had an outsized potential."

Seeing beyond the current opportunity is paramount, such as the potential for immuno-oncology assets to be used in different therapeutic areas as more knowledge is gained of the immune system, both innate and adaptive.

"Some of the approaches in the rare disease area are ways to pry open our larger unmet medical needs," said Barbara Dalton, a senior managing partner of Pfizer Ventures, a unit of New York-based Pfizer Inc.

While venture capital money flowing into the biopharma space in 2018 hit record levels, some new sources of capital are coming from tourists rather than residents, Dalton said.

"Usually areas of the globe start investing heavily and then they disappear," she said. "We're in a great place right now, but please don't spend all of your seed in corn."

At Pfizer, she takes a portfolio approach, investing in high-risk and low-risk opportunities, some tools and some revenue-generating companies, realizing not all of them will succeed. It is nearly impossible at the time of investment to predict what will come, but historically it has taken 25 years for companies to find success with certain antibodies and with RNAi.

"You have to have enough diversity in order to catch a wave or be in front," Dalton said.