Our international Life Sciences team attended the J.P. Morgan Healthcare Conference (JPM) once again to connect with global industry leaders, emerging fast-growth companies, innovative technology creators and members of the investment community. This article summarises the key takeaways from the 42nd annual conference: the largest healthcare investment symposium in the industry.
Cautious optimism was the prevailing attitude amongst biotech CEOs and investors. Here we've broken down the key themes of discussion at this year's conference, which we expect to be major topics throughout 2024.
Public markets
After a largely lacklustre 2023, the last six weeks of the year in the run up to JPM brought some glimmers of hope. On the public markets, the XBI rallied and at one point was up 25% on news that the Federal Reserve had left key US interest rates unchanged after 22 successive hikes, and was signalling reductions in rates in 2024. As has been widely discussed, macro factors are particularly important for the biotech sector, with high interest rates depressing current valuations. Recovery has long been predicted to be dependent on a reduction in interest rates, and it was encouraging to see some signs of this trend beginning.
Uncertainty about the upcoming US election continues to weigh on the market. Whilst a few NASDAQ IPOs are rumoured to be in the pipeline (with Metagenomi and Arrivent announcing intentions to list), there is little immediate expectation that the traditional IPO window will re-open quickly in 2024. Conversely, there may be opportunities for reverse-mergers as private companies looking for a listing pair up with the current crop of so-called fallen angels (public biotechs whose programme has failed, leaving them as a cash shell).
M&A
2023 ended up as a strong year for M&A, thanks to nine US$1 billion+ M&A deals announced in Q4 (including two in the last few days of 2023). Transaction values doubled from the prior year, with well over US$100 billion in deals. The expectation is that the trend will continue, driven by Big Pharma looking for assets to replace drugs coming off patent. These deals involved target companies primarily with late-stage assets, either marketed drugs or products with clinical proof of concept in phase 3 trials. For example, Roche announced the acquisition of Carmot Therapeutics for US$2.7 billion. Carmot's lead programme is a once-a-week injection called CT-388, a dual GLP-1/GIP receptor agonist like Lilly's Zepbound. Carmot had been planning to brave the icy IPO market with a US$100 million IPO to fund its continued clinical development programme. Abbvie also made a foray into immunotherapy, announcing the acquisition of ADC company ImmunoGen for US$10.1 billion.
Almost all the Q4 deals were structured to involve an element of contingent or milestone consideration. Similarly, 2024 got off to a strong start for M&A with each of J&J, Merck, GSK (see below) and Novartis announcing acquisitions.
FTC regulatory intervention
The Federal Trade Commission is becoming more assertive in US anti-trust regulation in the biopharma sector. Its well-publicised intervention in Amgen's US$27 billion acquisition of Horizon Therapeutics plc was based on concern that the deal would enable Amgen to leverage its large portfolio of blockbuster drugs to pressure insurance companies and pharmacy benefit managers into favouring Horizon's two monopoly products (Tepezza™, for the treatment of thyroid eye disease and Krystexxa™, for the treatment of chronic refractory gout).
The FTC's intervention in the licence and development deal announced between Sanofi and Maze Therapeutics for a phase 1 oral therapy in Pompe disease was even more eye-catching. It is relatively unusual for the FTC to interfere with early-stage partnering arrangements, as opposed to M&A, and its objection was based on a novel theory of harm. Troublingly, Sanofi pulled out of the deal rather than face the litigation burden of challenging the FTC in the courts.
Private fundraisings
VCs have plenty of dry powder which they need to invest. New funds are still being formed, adding to the cash pile. For example, shortly before the start of JPM, Goldman Sachs announced the launch of a new US$650 million fund, West Street Life Sciences I, which will specifically target early- to mid-stage therapeutic companies with multi-asset portfolios as well as tools and diagnostics firms.
Seed stage and modest Series A financings remain strong. For large Series A, and later rounds, the world of the 'haves' and the 'have nots' continues. For the lucky few, in hot therapeutic areas or with recent readouts of strong data which de-risk their programmes, capital is still readily available. For example, Aiolos Bio announced an impressive US$250 million Series A raise for a Phase II-ready asthma/anti-inflammatory antibody targeting the TSLP pathway in-licensed from Hengrui, only to stun the market a matter of weeks later by announcing its acquisition by GSK for US$1 billion upfront and up to US$400 million in milestones.
But times are hard for companies who are low on cash and do not have strong data, or where the next significant data readout is some way off. For those companies, it's still a question of survival until sentiment improves.
Hot indications
Obesity and other metabolic diseases, inflamation and immunology (I&I) and CNS (neuropsychiatry) are all tipped as hot indications for 2024. In obesity, GLP-1 receptor agonists remain in high demand from Big Pharma. There was some discussion about supply constraints and difficulties in meeting patient demand. Some analysts are predicting peak sales for this product category of US$100 billion. I&I also remains hot, as evidenced by Roivant's sale of its Telavant subsidiary (including US rights in an irritable bowel disease asset) to Roche for US$7.1 billion. Roivant in-licensed the asset from Pfizer for free only 10 months earlier and had spent just US$15 million on developing it.
In respect of CNS, BMS doubled down on this segment by agreeing to buy Karuna Therapeutics for US$14 billion in cash. Karuna sits on the cusp of having the first schizophrenia treatment approved for years. With a PDUFA date of September 2024, KarXT is a combination of xanomeline-trospium for adult patients with schizophrenia, but Karuna has also been testing it in Alzheimer's disease psychosis. Also in CNS, Abbvie agreed to buy Cerevelle Therapeutics, with a neuroscience pipeline of multiple clinical-stage and preclinical candidates with potential across several diseases including schizophrenia, Parkinson's disease, and mood disorders, for US$8 billion.
Hot modalities
After a spate of approvals in 2023 (including bluebird bio's Lyfgenia™ (lovotibeglogene autotemcel) for sickle cell disease and Pfizer's Beqvez™ (fidanacogene elaparvovec) for Haemophilia B), gene therapy continues to attract a lot of attention. Sarepta has also just filed confirmatory data with FDA for Elevidys™, its Duchene Musuclar Dystropy product, seeking to expand label to cover non-ambulatory boys (currently just ambulatory) and a wider age range. CRISPR-mediated gene editing and base editing are also attracting a lot of attention following the FDA's approval of Casgevy™ (exagamglogene autotemcel), Vertex/Crispr Therapeutic's beta-thalassemia/sickle cell disease gene editing product. Interestingly, there are already signs of an uptick in CRISPR patent litigation, as commercial products come to market. The CRISPR patent landscape is notoriously fragmented, and patent holders are likely to take a quite different view of incorporation of their patented technology in a human therapeutic compared to what historically has been a tolerant view of its use as a research tool in the course of product development.
Antibody-drug conjugates (ADC) are still very much in favour. Merck announced a deal with Daiichi Sakyo in October 2023 to acquire rights to three ADC programmes for an upfront cost of US$4 billion and potential deal value (with milestones) of US$22 billion. This was followed by news of Abbvie's acquisition of ImmunoGen, another specialist ADC company with programmes targeting solid tumours, and then J&J's announced acquisition of Ambrx during JPM. And each of these were preceded by Pfizer's big-ticket acquisition of Seagen. Early-stage companies working in this space are likely to benefit from this sustained interest from big pharma and investors.
Finally, as mentioned above, GLP-1 receptor agonists continue in the spotlight. There is intriguing speculation about the potential impact of these products outside obesity, for example as cardiovascular interventions, either as mono- or combination therapies. Label extensions seem likely. MASH is another therapeutic area where the impact of GLP-1 RAs is being assessed. With no authorised therapies, there is a significant unmet clinical need. Madrigal Pharmaceuticals is awaiting FDA approval for Resmetiron™, which will be the first MASH treatment (PDUFA date in March 2024). But the GLP-1s are casting a bit of a shadow. Will they eat Madrigal’s lunch? The impact on MedTech companies, potentially reducing demand for joint prosthesis or electro-physiology products, also came up in discussions.
Clinical trials difficulties
Some recent clinical trials failures are shining a light on the role of the CRO. For example, Acelyrin announced a phase 3 trial failure in September 2023 for its lead candidate, izokibep™ (an IL-17A inhibitor for the treatment of moderate to severe hidradenitis suppurativa). The trial results were announced just months after Acelyrin’s US$540 million IPO, and appeared to show that izokibep did not beat placebo on the primary endpoint. Acelyrin has claimed that a protocol error by the CRO, Fortrea (itself spun-out of Labcorp and listed in February 2023) , resulted in patients not being dosed as planned. Fortrea denies the allegations.
In October 2023, BioVie also blamed protocol deviations and GCP violations at a number of clinical trial sites for the failure of its potential Alzheimer disease drug, NE3107 (and anti-inflammatory insulin sensitizer). Both of these follow the trial in the English courts back in 2022 of a claim by a Swiss biotech company against its CRO for GBP100 million in wasted expenditure due to alleged breaches of protocol, in particular for allowing trial subjects to be enrolled contrary to the exclusion criteria set out in the trial protocol and not reporting these deviations to the sponsor (Cardiorentis AG v IQVIA Ltd & IQVIA RDS, Inc. [2022] EWHC 250 (Comm)).
Time to dust off your clinical MSAs for a long, hard look at the performance standards, service levels and liability clauses?
