Throughout the year we have published the views of company executives, government regulators, industry analysts and scientists on a variety of topics and, in our popular annual feature, we include a selection of these that paints a picture of the significant events that shaped 2019. The major talking point was on the capital markets front where investors turned their backs on the biopharmaceutical sector for most of the year returned big time in the final quarter. M&As helped sparked life, with blockbuster deals taking place throughout the year, particularly in the red hot cell and gene therapy space, with an exclamation point added this week as Roche Holding AG followed up the completion of its $4.8 billion acquisition of Spark Therapeutics Inc. with the announcement of a blockbuster deal with Sarepta Therapeutics Inc., underscoring big pharmas appetite for gene therapy technologies.

Our favorite quote from the year

The Wright brothers showed that you could fly a plane, but it wasnt very far, and it wasnt very safe. Thats where cell therapy is now.At a scientific session at the American Society of Hematology meeting on gene editing, Wendell Lim, professor and chair of cellular and molecular pharmacology at the University of California, San Francisco, and the co-founder of Cell Design Labs, discussed his laboratorys work that uses gene editing to improve cell therapies, specifically CAR T cells

Capital markets

The biopharmaceutical sector headed into 2019 on a negative note, with most of the damage inflicted in December 2018 a month that will go down as one of the worst for equities, with the Dow Jones Industrial Average stumbling by almost 9% and the Nasdaq Composite performing just as poorly, dropping 9.5%.

Summing up the situation, the Cowen and Co. biotechnology analyst team wrote in its monthly biotech thermometer report to clients: "Investors are shell-shocked by the depreciation that was so quick, so dramatic, and so close to the end of the year. Sentiment is worse than we can remember over the last five years, and in fact many investors have developed a bear market mindset."

Fast forward 12 months and the curtain is now closing on a year where, for many months, the biopharmaceutical industry languished and company executives undoubtedly were wondering, during that difficult period, whether there would be a reversal of fortunes.

The answer came in the fourth quarter. To the surprise of industry pundits, public biopharmaceutical companies turned the corner and are on a major upswing, with the sector outperforming the general market in final frame with a 23% upswing year-to-date.

Reflecting on the change, Cowen and Co. analysts, writing in their monthly Biotech Thermometer noted, "Those who stuck with the sector through the famine of Q3 have feasted on a cornucopia of returns during the first two months of Q4."

Bear to bull

Most analysts speculated at the beginning of the year that the recipe to create an upswing in the sectors fortunes would be tied to an increase in M&A activity. SVB Leerink analyst Joseph Schwartz was certainly prescient in a note to investors earlier this year pointing to gene therapy companies as being prime targets. "With increasing pricing pressure and the emphasis on 'value' from payers, we believe curative gene therapy programs represent ideal acquisition targets for large pharma or biotech companies looking to diversify their product portfolios and reduce their reliance on price hikes."

RBC Capital Markets analyst Brian Abrahams, writing in the 2019 RBC Biotech Outlook Report, struck a similar note: "For 2019, we are more neutral vs. 2018, as growth and competitive headwinds, alongside more tangible manifestations of drug cost containment, potentially mitigate increasingly attractive valuations among larger-caps and what we expect will be increasing M&A activity and enthusiasm backstopping the smids."

Industry reels from FDA commissioner resignation

The announcement from Scott Gottlieb that he was resigning as FDA commissioner to return to the American Enterprise Institute in April took the industry by surprise, and the news weighed heavily on biopharmaceutical equities, with the BioWorld Biopharmaceutical index falling almost 4% on the news.

"Scott has helped us to lower drug prices, get a record number of generic drugs approved and onto the market, and so many other things. He and his talents will be greatly missed."President Donald Trump's tweet in response to Scott Gottlieb's announcement that he was resigning as FDA commissioner

The industry had to wait until December for a replacement when the U.S. Senate voted 72-18 to confirm Stephen Hahn as the commissioner of the FDA, providing the agency with another commissioner with a deep background in oncology. Secretary of Health and Human Services Alex Azar thanked the Senate for prioritizing the candidates nomination, adding that the development will be a major boost to the already rapid pace of the Presidents aggressive public health agenda.

Setting the agenda

Looking at the BioWorld Biopharmaceutical index it reveals that it did attain an almost 12% increase in value by February. Catalyzing the jump was the positive vibe that emanated from the January J.P. Morgan 37th annual health care conference, which every year sets the industrys agenda. From the market reaction to the upcoming plans laid bare by presentations from many of the leading biotechnology and big pharma companies in attendance, it appeared that the sector came out ahead.

Business development

"Once again we're seeing a lot of billion-dollar deals and they tend to be preclinical-stage deals that have multiple assets. It's a trend that started in 2016."David Thomas, vice president of industry research and analysis for the Biotechnology Innovation Organization, on its 2019 Emerging Therapeutic Company Trend Report, which showed that the number of global R&D-stage licensing deals surged by 107% in 2018 over the prior year

"The shift away from larger market drugs to more niche indications reflects the change in R&D focus of biopharma companies."Roger Humphrey, executive managing director and leader of JLL's Life Sciences group

Despite a decade of effort to streamline discovery and development and increase productivity, the projected return on investment in R&D at the worlds leading pharmaceutical companies has hit an all-time low, according to the 10th annual analysis by management consultancy Deloitte.

No other industry would operate on such low R&D returns.Substantive change is needed to shorten R&D cycle times, according to Karen Taylor, director of Deloittes health practice

Cash flows

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.

[This is] "the most exciting time to be investing in life sciences in a generation."Otello Stampacchia, managing director, Omega Funds, which raised $438 million to deploy into new and existing life sciences companies

"Capital is so available, it strikes me insane that almost half the industry needs to raise money this year."Dennis Purcell, founder and senior advisor at Aisling Capital LLC, during a session at the BIO CEO & Investor Conference

"It's very much a chess game in the current market; you have to think multiple steps out."Nol Brown, managing director, health care investment banking, at Cantor Fitzgerald, on planning whether to IPO during a session at the BIO CEO & Investor Conference

"It's a great time to be an entrepreneur. There are so many sources of capital. And there's a lot of it."Chau Quang Khuong, private equity partner at Orbimed Advisors, speaking at the Biocom Global Life Science Partnering Conference on the advantages of starting a company now

M&As

Bristol-Myers Squibb Co.'s announced $74 billion bid for Celgene Corp., the largest M&A in biopharma history, made for what J.P. Morgan analyst Cory Kasimov called "one of the most significant pre-conference announcements ever."

Although the deal did not spark a wave of M&A activity at the time, transactions remained sporadic for the rest of the year. According to the 2020 RBC Biotech Outlook report, Despite the unevenness throughout the course of 2019, the forces we believed would stimulate a meaningful pickup in acquisitions coalesced to generate new highs in biopharma acquisitions, with a record number of announced $1B+ public company deals.

"Two turkeys don't make an eagle. Both businesses have seen their share of challenges, with ABBV's Humira seeing competitive pressures both in the U.S. and EU and Allergan's rather well-documented business challenges. However, financial potential does have our attention, with the deal being immediately accretive to earnings."Christopher J. Raymond, Piper Jaffray analyst, in a research note on the first reaction to the announcement that Abbvie Inc. was proposing to acquire Allergan plc in a cash and stock deal worth about $63 billion

Gene therapy is hot

Barely a day went by this year without news relating to cell and gene therapy companies being announced. Given the ongoing developments, it was not surprising that the sector continued to attract financing and business development, with biopharma companies ensuring that they secured a position in the space for themselves through partnering and acquisitions.

"Gene therapy gets around many of the drug delivery challenges that have plagued other treatment modalities like small molecules. In part, that is because it's a one-time approach and also it really enables you to target the tissue bed of interest, in some cases direct to the CNS."Shankar Ramaswamy, chief business officer, Axovant Gene Therapies Ltd.

"Gene therapies are among the most exciting medical advancements of our time. However, they also pose a great technical challenge, since the AAV particles designed to deliver genes to tissues are subject to immediate and overwhelming immune attack, specifically by complement C3, which may result in significant safety and efficacy constraints. We believe that the targeted control of C3 may prevent the C3-mediated attack on AAV particles."Cedric Francois, CEO and co-founder of Apellis Pharmaceuticals Inc.

"[Many gene therapies] are introduced with much higher levels of uncertainty about their long-term safety and effectiveness than standard treatments, and patients and insurers are being asked to pay extremely high prices up front for the promise of long-term benefit."Steven Pearson, president, The Institute for Clinical and Economic Review, which is proposing adaptations to the framework it uses in assessing the value of potential single or short-term transformative therapies (SSTs). The proposals are intended to help decision-makers conduct a more reliable and transparent evaluation of the uncertainty, value and value-based pricing of SSTs

Some of the gene therapeutic products and candidates have truncated the size of the genes and have done some pretty clever maneuvers to try and make the gene inserts smaller in order to be incorporated by AAV.Daniel Dornbusch, head of business development at Dnarx Inc., explained, while noting that the full length might be better and there are many genes that cant be truncated

"Gene editing is a rapidly developing technology that represents one of the most exciting developments in medicine. These techniques will be integral to the next generation of advanced therapeutics and we welcome their potential to provide important, and potentially life-saving, treatments for patients. As with all breakthrough biotechnologies, we need to exercise caution and good stewardship in our research and development practices and ensure that work involving the genetic modification of cells takes place within the bioethical framework outlined in these principles."Janet Lambert, CEO, The Alliance for Regenerative Medicine commenting on the release of the Alliance's Therapeutic Developers' Statement of Principles, setting forth a bioethical framework for the use of gene editing in therapeutic applications

Artificial intelligence and machine learning

There is no doubt that the next wave of drug discovery will be enabled by powerful supercomputers dining on complex algorithms to uncover potential new scientific approaches for the development of innovative therapeutics, and industry executives certainly provided BioWorld with a wide range of opinions on its value.

"The idea behind machine learning is that it's a method that should generalize and be able to make decisions or make estimates or classifications based on data it hasn't seen before."John Irvine, chief scientist for data analytics at Draper Laboratories, Siemens Healthineers. The firm is working with Brisbane's Translational Research Institute and using artificial intelligence to diagnose medical conditions ranging from breast cancer to post-traumatic stress disorder

"I think the drive in this field is that we saw the success of Google and Facebook to basically take what seemed like white noise out in the ether and squeeze out this gold; it's like the new gold rush. And in Alzheimer's we've been desperate for success, and it seems like we have this messy, noisy data it almost feels like static sometimes and we want a machine learning algorithm to come in and wrangle that up and squeeze gold out of what looks like noise. Unfortunately, I don't think it's going to be that easy."Newman Knowlton, a statistician at Millcreek, Utah-based statistical consulting firm Pentara Corp.

"When I have casual conversation about this, I think of the first cell phone and what iPhone is like today. At first, we wanted only a few functions, but we eventually realized we needed more functionality to benefit from the technology. It's the same in biomedicine."Ken Drazan, CEO, Arsenal Biosciences Inc.

"Data-driven medical innovation is growing exponentially, and our partnership with Google will help us lead the digital transformation in health care. It will empower us to solve some of the most complex medical problems; better anticipate the needs of people we serve; and meet them when, where and how they need us. We will share our knowledge and expertise globally while caring for people locally and always do it with a human touch."Gianrico Farrugia, president and CEO of Mayo Clinic

"Across the globe, clinicians spend more time doing data entry in patients' records than they do treating patients, and I think AI has a real opportunity to change that."Chris Nave, Managing Director, Brandon Capital

Editors note: See Fridays issue for Part 2.

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Perspectives on the year: The industry has its say on the markets, M&A and gene therapy - BioWorld Online

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