For biopharma, 2019 can be described as a terrific year – with a few asterisks. The financial markets were flourishing, with venture capital dollars, in particular, flowing to the sector, while dealmaking reached historic proportions. Meanwhile, scientific breakthroughs led the way as cell and gene therapies gained ground, the first signs of success emerged with new technologies like CRISPR and the long-awaited promise of genomics found its way to the front lines of health care. But there are some warnings on the horizon. The drug pricing debate continues to ramp up and expand beyond the U.S., the side effects of Brexit and the U.S./China trade war are starting to show, and pharma’s opioid reckoning appears to have finally come due.
Before we start looking ahead to 2020, here’s quick look back at some of the top trends and news stories from the biopharma sector for 2019, starting with a decade-busting M&A record.
Celgene sale tops M&As and deals
The dealmaking environment in 2019 blew away not only the prior year, which by itself had a stellar showing, but topped all years within the last 10, logging the highest number of deals and the highest projected value.
Likewise, mega-M&As also made the year a standout. The November closing of Bristol-Myers Squibb Co.’s buyout of Celgene Corp. for $74 billion places 2019 nearly at the top for logging the highest value biopharma M&A to date, just behind Actavis plc’s purchase of Allergan Inc. in 2015 for $77 billion. Another whopper, Takeda Pharmaceutical Co. Ltd.’s acquisition of Shire plc in January for $62.32 billion, is the fourth largest, after the Wyeth and Pfizer Inc. merger in 2009 for $68 billion, solidifying the year with two of the industry’s largest M&As ever.
But the takeover of Celgene marks a historic event for a more than 40-year-old industry, considering the company started as a pure-play biotech in 1986, much like Genentech Inc., founded in 1976, which was bought out for $46.8 billion by Roche Holdings AG in 2009. The two M&As rank second and sixth as the highest value biopharma M&As, but they would be the top two if looking strictly at acquisitions of biotech developers. Also making that narrowed list are two other large acquisitions in 2019: Pfizer’s purchase of Array Biopharma Inc. in July for $11.4 billion, and Eli Lilly and Co.’s buyout of Loxo Oncology Inc. in February for $8 billion. According to BioWorld data, they rank 12th and 20th for the most money paid for a biotech company. Celgene, Array and Loxo are focused on small-molecule therapeutics for cancer and other indications, but Celgene also works on CAR T-cell therapies.
Aside from the M&A, Celgene is party to another enormous deal in 2019: its divestment of oral phosphodiesterase 4 inhibitor Otezla (apremilast) and related assets to Amgen Inc. for $13.4 billion. It represents the second highest value of any non-M&A deal, including asset purchases, licensings and collaborations, within the databases of both BioWorld and Cortellis. Novartis AG purchased Glaxosmithkline plc’s oncology portfolio in 2014 for $16 billion. Otezla gained FDA approval in 2014 for active psoriatic arthritis and moderate to severe plaque psoriasis and by expansion could garner up to $10 billion in sales, according to some analysts.
Moving into 2020, potential closings of some other large pending M&As include a $9.7 billion buyout of The Medicines Co. by Novartis, and the $63 billion purchase of Allergan plc by Abbvie Inc. Both are expected to close early in the new year.
The volume of M&As at 166 in 2019 is the highest in the last 10 years, while the value ($214.3 billion) comes in second behind the $256.4 billion in 2015. Deals in 2019 reached a 10-year high with 1,567 tracked and a projected value of $152 billion. In total, by Dec. 20, there were 37 deals announced during the year with projected values of more than $1 billion.
No difficulty in attracting capital
Despite a rough ride on the capital markets for much of the year, particularly in the second and third quarters, the biopharmaceutical sector had no difficulty in attracting capital once again. According to BioWorld data, with one day left before the curtain closes on 2019, approximately $57.5 billion has been generated by global companies from public and private sources. That total is about $9 billion shy of the 2018 total cash raised and $11 billion off the $68.4 billion leading total generated in 2015, and places the amount firmly in third place in terms of totals raised in the history of the industry.
Public offerings, including IPOs, have generated almost $30 billion, or 52%, of the total raised this year. The number of new biopharma IPOs that have been completed demonstrated a healthy demand for new issues, despite the negative sentiment that persisted for the sector in general. Globally, a total of 62 biopharma IPOs raised $8.4 billion in 2019, just behind the $10.7 billion raised in 2018 but ahead of all other years in the BioWorld database dating back to 2000. The year set records for the most IPO proceeds in the months of February, June and September, and it can also boast having the best second quarter on record.
Global private companies started out the year in record fashion, attracting more than $4.6 billion in the first quarter. Although the pace of transactions slowed slightly in the second quarter with about $3.8 billion raised, it picked up again in the third quarter with more than $4 billion being generated. Private funding has continued to be robust in the final quarter, bringing the year-to-date total raised to almost $16 billion, just $1.3 billion short of the record amount of private financings established in 2018.
CRISPR goes ‘Prime’ time
Gene editing made clinical as well as basic science progress in 2019. On the clinical side, CRISPR Therapeutics AG and Vertex Pharmaceuticals Inc. reported in November that two patients treated with CRISPR/Cas9 edited autologous bone marrow for transfusion-dependent beta-thalassemia and sickle cell disease, respectively, showed successful engraftment and improved symptoms. The data provide proof of principle that gene editing, whose transformative potential has been recognized since it was first described, will be able to deliver clinically as well as in research applications.
Basic researchers, meanwhile, continue to expand gene editing’s toolbox. In October, researchers at the Broad Institute of Harvard and MIT reported the development of prime editing, an editing method that can in principle correct 90% of the roughly 75,000 currently known genomic changes that lead to genetic disease. In the words of lead investigator David Liu, Thomas Dudley Cabot Professor of the Natural Sciences at Harvard University, prime editing joins CRISPR itself and base editing as tools that can enable “a long-standing aspiration in the molecular life sciences" to be able to edit the genome at will.
Of course, not all CRISPR news was positive: the end of the year saw Chinese scientist He Jiankui sentenced to three years in prison and fined ¥3 million (US$429,421) for illegally carrying out the human embryo gene editing that led to the birth of twin girls and another baby with heritable changes to their genomes.
The Alzheimer’s candidate that wouldn’t die
In October, Cambridge, Mass.-based Biogen Inc. raised eyebrows on Wall Street by saying the company would – based on talks with the FDA – pursue regulatory approval for anti-amyloid beta antibody aducanumab in early Alzheimer’s disease (AD). Although data from phase III studies called Emerge and Engage did not at first seem promising, Biogen pointed out that Emerge met its primary endpoint showing a significant reduction in clinical decline, and cited results from a subset of patients in Engage who did well on high doses of the drug, partnered with Eisai Co. Ltd., of Tokyo.
Specifically, the decision to file was based on a new analysis of a larger data set from the phase III work discontinued in March 2019 following a futility analysis. Further findings suggest aducanumab is pharmacologically and clinically active in reducing brain amyloid as well as pushing back clinical decline, measured by the prespecified primary endpoint Clinical Dementia Rating-Sum of Boxes.
The BLA might not be such a long shot. More data rolled out at the Clinical Trial on Alzheimer’s Disease annual meeting in early December in San Diego, and SVB Leerink analyst Geoffrey Porges consulted an expert who deemed Emerge “well-controlled, and the result is compelling and statistically significant despite the inconsistent Engage result and the failed futility analysis,” adding that the “dose-dependent imaging results in Engage could further support the approval based on her experience with the FDA’s neuroscience division.”
Another factor may be regulators’ urgency to approve AD-modifying therapies. “Despite the overall positive tone of the call, the specialist did express her concerns that the FDA will inevitably look into the full set of raw data which have not yet been disclosed by Biogen, and a materially different finding (though unlikely) could result an unfavorable decision for the drug,” Porges wrote in a report. Biogen set an early 2020 timeline for submitting the BLA, and “key areas will be challenged, including the detailed description and accounting for clinical trial discontinuations and dropouts, incremental patients post-futility and potentially other biases in Biogen’s various analyses,” he said.
AI and machine learning: A game changer in health care
It was inevitable that to make sense of the tsunami of data being generated in the health care system every day new tools would be required. While still a work in progress, artificial intelligence, an umbrella term that includes machine learning, natural language processing, big data and digital health applications, is being applied in all aspects of health care to not only keep pace with the data deluge but also offer up new lines of research enquiry and generate predictive insights.
There is no doubt that the next wave of drug discovery will be enabled by powerful supercomputers dining on complex algorithms that uncover potential new scientific approaches for the development of innovative therapeutics. But its impact goes much deeper than that. The McKinsey Global Institute, for example, estimates that applying big data strategies to better inform decision-making could generate up to $100 billion in value annually across the U.S. health care system.
That is why AI and its ever-increasing importance as a vital tool made it a unanimous choice as one of the leading stories of 2019. So important in fact that a 28-part joint BioWorld and BioWorld MedTech series was published earlier this year that took a deep dive into the trends, opportunities and challenges surrounding AI in health care.
There is already an abundance of evidence of AI’s influence bringing with it dramatic changes along the continuum from bench to bedside. For example, big pharma companies are partnering with AI-focused firms to elicit machine-learning help in finding new drug targets in diseases such as Alzheimer's, as well as identify patients for clinical studies where efforts to improve trial recruitment, efficiency and decision-making are underway at companies of all sizes as they look to better the daunting odds of achieving clinical success. Hospitals are using AI to improve medical diagnosis and image processing, where the analysis and interpretation of magnetic resonance and X-ray images can be reduced from hours to mere minutes.
Venture capital firms specializing in the health care space are also recognizing the importance of this emerging area and are supporting emerging biopharma companies that are using AI and machine learning to supercharge their drug discovery and development activities. Over the past two years, companies in this space have already attracted well in excess of $1 billion.
Drug pricing emerges as a global issue
Drug pricing was a major issue around the world through 2019 as authorities continued their efforts to lower the costs of health care, tap into the newest and most expensive gene and cell therapies, find treatments for rare diseases and deal with antibiotic resistance.
In the U.S. alone, a multitude of legislative attempts emerged through the year. Congress spent months working on H.R. 3, the Lower Drug Costs Now Act, with the goal of saving $345 billion in Medicare Part D prescription drugs starting in 2023. In mid-December, President Donald Trump signed a bill that would allow the importation of cheaper drugs from Canada – although Canada is pushing back. At the same time, efforts to lower prices of drugs have led to a spike in the number of ANDAs submitted to the FDA.
Canada also altered its approach to drug pricing by changing the countries it compares its drug prices with, so that the Patented Medicine Prices Review Board (PMPRB) will no longer compare drug prices to those of the U.S. and Switzerland, which have the most expensive drugs.
In the U.K. and Europe, the challenges were exemplified by the ongoing debate as to whether to allow for reimbursements of Vertex Pharmaceuticals Inc.’s cystic fibrosis drugs, including Trikafta (elexacaftor/ivacaftor/tezacaftor). Trikafta is priced at $311,503 per year and is on track to be released next year. In Europe, there also has been some forward momentum in coming to agreement on how to deal with reimbursement for cell and gene therapies as well as developing payment schemes for very expensive one-off therapies. Australia, too, is grappling with reimbursement for those emerging therapies.
In September, China expanded a pilot program to reduce the cost of generic drugs across the country. China has adopted a bid approach to supply government hospitals with drugs included in the country’s national reimbursement list. China wants to make money available for newer treatments by cutting how much it expends in low-costs generics. The cost of drugs in China has long been much higher than in most other places.
Japan is also pushing to lower drug costs, and its efforts have focused on encouraging the use of generics. The government wants 80% of its $95 billion drug market to be made up of generics by next year.
Opioid crisis hits the courtroom
In 2018, U.S. regulators and health officials got involved in the opioid fray, setting up the battles that took place this year. That’s when the courts took center stage, resoundingly, as several large companies surveyed the lay of the land and decided to settle rather than risk a longer fight.
In the high-profile Track 1 opioid cases of the County of Cuyahoga, et al. v. Purdue Pharma, LP, et al. and the County of Summit, et al. v. Purdue Pharma, LP, et al., Purdue filed for Chapter 11 bankruptcy in mid-September as it reached an agreement in principle to settle more than 2,000 opioid-related lawsuits filed by U.S. cities and counties in addition to more than two dozen states and territories. In doing that, a $10 billion settlement called for Purdue’s assets to be placed in a trust. The Sackler family, which has controlled the company since its founding in the 19th century, is to contribute at least $3 billion, with the potential for further contributions from the sales of its pharmaceutical businesses in other countries.
Some state attorneys general said the penalty wasn’t stiff enough, that the Sacklers should pay more, given the wealth the family has gained through Purdue and the marketing of Oxycontin.
"My concern centers on the amount of money to be paid by the Sackler family," Iowa AG Tom Miller said. "I believe they have the ability and responsibility to pay more than they guaranteed to pay under the agreement."
In early October, Mallinckrodt plc wholly owned subsidiaries Mallinckrodt LLC and Specgx LLC settled lawsuits with Ohio's Cuyahoga and Summit counties, putting to rest cases that were weeks away from coming to trial. Mallinckrodt agreed to pay $24 million in cash, provide $6 million in generic products and cover $500,000 for the counties' time and expenses.
Just a few days later, Johnson & Johnson, after taking a $572 million hit in late August in an Oklahoma trial, and having looked to its similar and impending troubles in the same spot, agreed to a $10 million settlement also with Cuyahoga and Summit counties. While J&J settled with no admission of liability, it agreed to reimburse the counties $5 million for legal and other trial preparation expenses, and to direct $5.4 million of its charitable contributions to nonprofit organizations offering opioid-related programs in the two counties. J&J officials said the company was open to an "appropriate, comprehensive resolution" of all U.S. opioid litigation.
The final two Track 1 cases were settled at the last minute at the end of October. Jerusalem-based Teva Pharmaceutical Industries Ltd. agreed to pay Cuyahoga and Summit counties $20 million over three years and provide $25 million worth of Suboxone (buprenorphine naloxone) to treat people with opioid addiction.
In a separate settlement with the Ohio counties, three drug distributors – AmerisourceBergen, Cardinal Health and McKesson – agreed to pay $215 million. The distributors said that although they "strongly dispute the allegations made by the two counties, they believe settling the bellwether trial is an important stepping stone to achieving a global resolution and delivering meaningful relief."
A taxing trade war
The U.S.-China trade war lumbered onward in 2019, flaring at times and smoldering at others before yielding a preliminary trade agreement in December. The deal, yet to be signed, would likely be a welcome first step toward resolving billions of dollars in trade tariffs each country has placed or threatened to place on the other. Any agreement, however, will arrive too late to spare the life sciences industry from initial damages.
During 2019, industry-watchers took note of reduced flows of once-plentiful Chinese money into U.S. companies, attributed in large part to concern over increased activity by the Committee on Foreign Investment in the U.S. By September, Silicon Valley Bank was predicting a 27% decline in total funding into the U.S. and Europe biopharma in 2019. Experts also raised alarm about the potential for disruptions to China-supplied APIs, a key element in the global drug supply chain.
So far, the U.S. biopharma industry has successfully lobbied against tariffs on medicinal-related products made in China and sold in the U.S., and China hasn't taken any action to cut the U.S. off from critical medicines, such as antibiotics, in which it plays a particularly important role. Despite a Christmas Eve pronouncement by President Donald Trump that signing of the first phase of a U.S.-trade agreement is slated for his next get-together with President Xi Jinping, uncertainty remained as the year wound down.
On a more hopeful note, China's active domestic life sciences sector is rising to meet the country's demands for homegrown innovative medicines, as exemplified by Innovent Biologics Inc.'s Tyvyt (sintilimab) and Hutchison China Meditech Ltd.'s Elunate (fruquintinib). Encouragingly for cross-border ties, some of the most innovative projects are being built on cross-border partnerships with U.S.-based companies, such as those between Nanjing Legend Biotech Co. Ltd. and Janssen Biotech Inc. and CASI Pharmaceuticals Inc., of Rockville, Md., and its Chinese partner, Juventas Cell Therapy Ltd., of Beijing. The pairs, co-developers of two investigational CAR T therapies that entered the clinic in December, seem to suggest that despite trade turbulence, the collaborative spirit at the core of global biopharma innovation remains strong.
Despite its small size, Belgium has long held its own as one of Europe’s leading biotechnology clusters, but 2019 was a particularly good year for the country’s sector. More to the point – for a country that retains sharp regional and linguistic divisions – it was a very good year for the biotechnology industry in Flanders, the Dutch-speaking northern half of the country, which has a population similar to that of Massachusetts but only about half of its area.
Ghent-based Ablynx NV, for long the region’s flagship biotech company, has now been subsumed into Paris-based Sanofi SA following its $4.8 billion acquisition in 2018, but it remains an important node within the Sanofi R&D organization. Moreover, its distinctive llama-derived nanobody fragment antibody platform gained a first FDA approval in February for Cablivi (caplacizumab-yhdp) in acquired thrombotic thrombocytopenic purpura, a rare blood clotting disorder. But Ablynx has been surpassed by two neighboring firms, which continue to ramp up strongly. Mechelen-based Galapagos NV closed out the year with an NDA filing in rheumatoid arthritis for filgotinib, its oral JAK1 inhibitor partnered with Gilead Sciences Inc., of Foster City Calif. Galapagos is now valued at about $13.5 billion, following its historic mega-deal in July with Gilead, which paid $3.95 billion up front and invested another $1.1 billion in equity in order to gain ex-European rights to everything emanating from the Galapagos pipeline over the next decade.
Argenx NV, also of Ghent, raised $557 million in a global share offering in November, to maintain the momentum in its pipeline of llama-derived – but conventional – antibodies in development for autoimmune disease and cancer. It is now valued at almost $7 billion. All three firms have been major beneficiaries of Europe’s big turn to Nasdaq in recent years, which has given them high levels of visibility as well as access to deep pools of liquidity. Each in its own way exemplifies how rapidly the biotech industry has globalized. Nasdaq is now open to high quality companies regardless of their location.
Compiled by Anette Breindl, Karen Carey, Michael Fitzhugh, Lee Landenberger, Randy Osborne, Alfred Romann, Cormac Sheridan and Peter Winter