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25 Jan 2024

Life sciences A to Z - JK is for JPM: what to Know

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The 42nd J.P. Morgan Healthcare Conference took place in San Francisco during the second week of January. This annual gathering brings together industry leaders, healthcare innovators, executives, and investors to share latest developments, ideas, and products and to explore potential investment opportunities.

In this article, we have summarised some of the key trends identified during the conference as we look to the year ahead and the opportunities it is likely to bring.

Advanced AI

Perhaps unsurprisingly given the recent explosion of interest in this area, AI in all its forms was a hot topic during this year's conference. Widely considered as having the ability to revolutionise the healthcare industry by streamlining processes, reducing costs, and improving clinical decision-making and patient experience, companies are investing heavily in AI technologies. Many have announced partnerships with semiconductor manufacturers or chip suppliers to apply AI technology in a medical setting. For example, Cerebras Systems, known for developing computing chips for deep learning applications, has partnered with Mayo Clinic to develop various AI models. These include models which can analyse genome data, summarise lengthy medical records, and detect pancreatic cancer in pre-diagnostic scans far earlier than the eventual clinical diagnosis. Whilst it is important to emphasise that AI will not make decisions and will not be a substitute for doctors, there is huge potential for AI to be used in a medical setting.

In a research context, AI-enabled models are being used in a variety of ways to accelerate the drug discovery process. There are also use cases for faster regulatory approvals and more efficient clinical trial designs. The UK is in the race with deals such as Merck's strategic collaborations with two UK AI companies, BenevolentAI and Exscientia, being announced on the same day in September 2023.

Investment in advanced AI and strategic partnerships between technology providers and healthcare/pharmaceutical companies will continue. The focus over the coming year will be to ensure the reliability and accuracy of AI generated outputs. This will be achieved by using high-quality models and data sets to minimise biases, errors and uncertainties. There will of course be challenges, as there often are with any new technology in previously unchartered territory, but the potential benefits are undeniably transformative.

Cell and gene therapy

Given that the conference took place just one month after the FDA's landmark approval of two novel autologous gene therapies (Casgevy and Lyfgenia) for sickle cell disease, including the first FDA-cleared gene therapy to utilise the CRISPR gene editing method (Casgevy), this was always going to be high on the agenda. The FDA will continue to leverage its accelerated approval pathway for gene therapies, and it is predicted that there will be several further approvals for gene therapies for rare genetic diseases this year. There are various hurdles, including the FDA's recent announcement that it is likely to insist on a black box safety warning in relation to secondary cancer concerns on all commercial CAR-T therapies and the CRISPR patent thicket which may well lead to protracted patent litigation together with other hurdles such as manufacturing challenges, issues with clinical development timelines, high set-up costs and different global regulatory requirements. However, the industry is starting to tackle these challenges, for example by using the recent proliferation of bespoke CROs and CDMOs to overcome manufacturing and development hurdles and by launching the START pilot program to support small companies by using a concierge service to accelerate approval. The FDA is also hoping to improve collaboration with regulators in other countries, particularly for rare diseases with limited patient numbers, and to harmonise regulations globally.

Antibody-drug conjugates and radiopharmaceuticals

Antibody-drug conjugates (ADCs) are highly targeted biopharmaceutical products, composed of a monoclonal antibody that binds to a specific target expressed on the cancer cell surface. ADCs are widely used for the treatment of cancer due to their ability to target and kill tumour cells whilst sparing normal cells and are therefore often described as "smart chemotherapy". They also have huge potential for use in the treatment of other diseases. In a similar vein, radiopharmaceuticals are radioisotopes bound to biological molecules which deliver a targeted dose of radiation directly to a tumour. The interest in radiopharmaceuticals has soared in recent years, following the approval of Novartis' prostate cancer drug Pluvicto.

Targeted therapies and precision medicines which can offer patients a better benefit/risk profile will continue to be key in oncology strategies throughout the industry and ADCs and radiopharmaceuticals will be a crucial part of those strategies. Whilst licensing deals, IPOs and M&A activity may have slowed in general during 2023, there was an uptick in ADC related deals, such as Merck’s ADC partnership with Daiichi Sankyo and AbbVie's acquisition of ImmunoGen, or more recently Johnson & Johnson's acquisition of ADC-focused Ambrx Biopharma. There have also been several recent deals in the radiopharmaceutical space such as Bristol Myers Squibb acquisition of Rayzebio, announced at the end of last year and, closer to home, Bicycle Therapeutics' strategic collaborations with Novartis and Bayer announced in March 2023. This activity is expected to continue into 2024 with drug revenue in both these areas forecasted to increase significantly over the next 5 years.

Obesity

No observation of key trends would be complete without a reference to the rapidly growing and lucrative obesity market. Currently dominated by Novo Nordisk (Wegovy) and Eli Lilly (Zepbound) there is plenty of room for challengers in the market notwithstanding sales of Wegovy resulting in Novo Nordisk becoming Europe’s largest drugmaker by market capitalisation last year. Wegovy and Zepbound are both GLP-1 drugs and suppress appetite but other obesity drugs in development work in other ways, for example by promoting satiety, and use easier methods of delivery without some of the side effects associated with the GLP-1 drugs (such as nausea and constipation).

Cautious optimism for 2024

There is a feeling of cautious optimism and enthusiasm for the year ahead. Many are hopeful that the biotech sector's downturn is over, however this is framed with a concern that the comeback may be short-lived. 2023 was challenging. It was the perfect storm of economic uncertainty, high interest rates, geopolitical conflict, and cautious investors who demanded certainty and progress. There was a slow-down in M&A activity, far fewer IPOs, and for companies already public, limited secondary offerings. Then came the spate of biotech lay-offs, restructurings and cost-cutting. Perhaps it is therefore unsurprising that January brings a hopeful optimism for the year ahead, a feeling of "the grass must be greener?".

The proof will be in the pudding, but with several high-profile acquisitions announced during the conference (GSK's purchase of Aiolos Bio for $1.4 billion, Boston Scientific's acquisition of Axonics for $3.7 billion, Johnson & Johnson's purchase of Ambrx Biopharma for nearly $2 billion, and Merck's acquisition of Harpoon Therapeutics for $680 million) the NASDAQ Biotech Index was up 4.5% in just three days. The question is whether this activity will continue, and more importantly whether it will filter down to the smaller players and the biotechs. Investors will likely remain cautious and selective in a funding market that has changed considerably over the last few years. They may focus their interest on more advanced companies which are lower risk and can demonstrate a clear strategy to achieving milestones such as clinical trials. Other challenges such as the contentious Inflation Reduction Act 2022 (IRA) which brings the threat of stricter drug price regulations together with the potential use of the Bayh-Dole Act's march-in process as a mechanism to control prices, could also curb investors' enthusiasm for R&D projects.

Conclusions

New modalities, more complex therapeutics, and exciting scientific advances have reshaped the pharmaceutical and biotech industry in recent years. As we look to the year ahead, the spotlight will be on several key therapeutic areas. GLP-1 drugs have shifted how obesity is treated, ADCs and radiopharmaceuticals are front and centre stage in oncology, and there are renewed high hopes for drugs that target neuro diseases such as Alzheimer's. The use of gene therapies has offered drugs that can silence genes and innovative ways of delivering them, and drug makers are getting more advanced at developing targeted and personalised therapies that offer improved patient outcomes. This is set against the backdrop of AI and the hope that new technologies may offer transformative solutions to current obstacles. Renewed investor interest, an improving IPO market, healthy M&A activity, approvals for high-profile therapies, and a trend towards innovation and advancement all indicate that the industry is heading into 2024 with a spring in its step.

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KEY CONTACT

Naomi Leach

Naomi Leach
Partner

T:  +44 20 7809 2960 M:  +44 7769 143 367 Email Naomi | Vcard Office:  London

Alexandra Pygall

Alexandra Pygall
Partner

T:  +44 20 7809 2137 M:  +44 7881 314 566 Email Alexandra | Vcard Office:  London

Alice Routh

Alice Routh
Associate

T:  +44 20 7809 2408 M:  +44 7340 762 683 Email Alice | Vcard Office:  London

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