Pricing, Politics and AI To Take Center Stage in 2024

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The JP Morgan Healthcare Conference (JPM) reflects the current mood of the life sciences market, and while the tenor was certainly more positive than in 2023, this optimism is dampened by economic uncertainty. Communicating with BioSpace, Daniella Kranjac, founding partner at Avant Bio is cautiously optimistic, “There are still a few dark clouds on the horizon, but with therapeutic-enabling technologies, Healthtech and other areas, our experience tends to inform a softer landing.”

Not surprisingly, geopolitical and macroeconomic themes continue to play major roles in the market. As interest rates are expected to fall in 2024, and the industry sees more successful public offerings, the potential is there for investment dollars to return to biopharma. However, with the industry seeing increased regulatory activity and given this is an election year, optimism is conservative at best. Kranjac explained that the election is one of the wild cards the industry is facing. “The variable impact that is difficult to predict is the election in 4Q and its effect on the economy and the industry.” She also stated that startups had more realistic expectations this year, but some were feeling strained in current cash positions.

Going into JPM 2024, venture capitalists were already preparing the industry for hard truths. Not only had tourist investors left biopharma but they are continuing to leave, according to a Bessemer Venture Partners 2024 Predictions report. Consequently, funding is harder to acquire. Deals are taking longer as investors do more due diligence and often require more major milestones to be achieved. The time of FOMO is long gone. While cautiously optimistic, Ansbert Gadicke, managing partner at MPM BioImpact, cautions, “We have to recognize that the [JPM] conference is for industry specialists. Most important is to have capital inflow from large generalist funds and they are not well represented at JPM unless it’s a bull market." It is these generalist investors that Gadicke feels may be more cautious than specialists.

Henry Chen, CEO of Tanvex CDMO, echoed this sense of cautious optimism, noting that he was surprised by the announcement of only a few larger acquisitions of public biotechs. Chen said the availability of capital to biotechs is still a concern, and therefore, there is a more disciplined way of spending it. “However, those [pharma companies, CDMOs, etc.] who have access to capital are aggressively positioning themselves for future growth, given the market downturn,” he said. 

Speaking with Biospace, Rob Williamson, president and chief operating officer of Triumvira Immunologics, Inc. summed up why there were few surprises for him at JPM. “M&A was strong in 2023, stronger than perhaps many realize, despite an extremely difficult financing environment. So, seeing a continuation of that to start the year was not necessarily a surprise,” he said. “Consolidation is a natural outcome from prior years of heavy investment, and I’m hopeful that this trend will continue.”

Williamson did note one surprise, which he finds encouraging. “There appears to be a growing appetite for deals in therapeutic areas that have traditionally been considered risky, including neuroscience.”

CGTs: Pricing & Perception

With the first two FDA-approved gene therapies for sickle cell disease (SCD), Casgevy and Lyfgenia, sporting price tags of $2.2 million and $3.1 million respectively, drug pricing was a natural topic on the minds of industry executives. These therapies join the ranks of Hemgenix ($3.5 million), Skysona, Zynteglo, Zolgensma and Luxturna in expense.

However, as Tim Hunt, chief executive officer of  The Alliance for Regenerative Medicine (ARM), pointed out during the Cell & Gene State of the Industry Briefing, the diseases cell and gene therapies (CGTs) treat usually cost a healthcare system millions throughout a patient’s lifetime. SCD costs between $4 million and $6 million during a patient’s lifetime and hemophilia B costs more than $600,00 annually, according to Orphanet Journal of Rare Diseases. Although CGTs are, eventually, cost-effective, the question remains whether they are affordable for healthcare systems.

Christian Cobaugh, chief executive officer of Vernal Biosciences, stated to BioSpace that while CGTs have been clinically validated, our thinking around CGTs must change. “While the pharmacoeconomics of CGT generally work, unless the pricing includes some type of pay-for-performance model, [it] is neither scalable nor sustainable.” Cobaugh further explained, “Once we start thinking about today’s CGTs as procedures more than products, we start to understand the high costs.”

Cobaugh anticipates that CGT development costs will come down once they become more routine, proceduralized and industrialized. “For example, the miracle of mobilizing, harvesting, expanding, editing, conditioning and engrafting a patient with an autologous cell therapy will seem downright medieval once we are able to infuse patients with a redosable gene editing medicine that gets to HSCs and edits the same targets,” he said. “We already know how to cheaply manufacture and distribute the latter.”

Chen shares Cobaugh’s opinion and highlighted that the manufacturability of CGTs has already improved greatly in a matter of a few years. “The key is to look at innovative cell and gene therapies and imagine where the cost can be managed, and not necessarily at a single time point,” he said.

Despite the challenges of CGTs, they are exciting. Through the first quarter of 2023, there were over 100 approved CGTs throughout the world and more than 3,500 in development (The state of cell and gene in 2023) and the market can only expect this to increase.

Politics & PR

Gearing up for 2024, the market has already seen an increase in regulations, both in the U.S. and worldwide, from pricing to artificial intelligence (AI). While it can be agreed that legislation and standardization are needed for elements such as AI, one cannot ignore the political environment. “It’s easy for politicians to take aim at biotech and pharma companies and paint them as greedy,” Williamson said, “but the cost of developing novel medicines and adhering to regulatory guidelines is staggering.”

In addition to the perception of greed, Chris Pirie, co-founder and chief operating officer at HDT Bio, noted the industry also suffers from a PR problem, which is exacerbated during an election year. “We see it as well in the trends of vaccine hesitancy, whether tied to conspiracy theories around microchips or fears of reactogenicity and adverse events or concerns regarding efficacy,” he said. “I believe we have a duty as developers to convey the value proposition of our products, while being candid about their limitations [or] drawbacks. It is largely on the industry to come together to explain the benefits of newer technologies, treatments, and to gain the trust of the public.”

Legislation

Going hand in hand with politics is legislation. While the industry is seeing a great deal of legislative activity regarding AI in health care globally, it is the Inflation Reduction Act (IRA) of 2022 that is top of mind. Williamson explained the complications surrounding regulating pricing in the industry. “The U.S. drug development industry is at the forefront of global innovation to improve human health and longevity, and efforts to drive down branded prescription drug prices, without working to improve efficiencies in the drug development cycle seem misguided and likely to stifle innovation.” In his opinion, reducing drug development costs while lowering prices is necessary. Without implementing legislation that does both, the industry’s ability to innovate is hindered.

At JPM, speakers on the Government Regulations & Policy: Are They Stifling Innovation panel, including Peter Rubin, executive director of the non-profit No Patient Left Behind, did not focus on the problem but instead started the conversation with how they could work with the government. “How do we align together around moderate changes that can improve the IRA?” Rubin asked. Recognizing the positive parts of the IRA is also essential. Rubin expressed hopes of seeing an extension of the positive parts, “like lowering out-of-pocket costs for patients no matter where you get your healthcare, Medicare or the exchanges or your employer, while fixing negatives, such as the anomalies like the disincentive for small molecule innovation.” Anchor

AI Tools: Realities & Mysteries

Huge investments into AI are taking place throughout the industry and discussions around the technology dominated JPM. Machine learning, AI and GenAI were mentioned in many, if not all, of the Biotech Showcase panels. Beth Rogozinski CEO of Oncoustics, began the AI & Machine Learning: Disrupting and Inspiring panel with the following statement “The AI in healthcare business and healthcare alone was over $6 billion worth of value it's got a compound annual growth rate of over 40%, meaning that by 2029, we're expecting this industry to be over $175 billion worth of value.” With this type of investment, there is an increased focus on the “Magnificent Seven” — Google Inc., Microsoft Health Solutions Group, AWS, Meta, NVIDIA Corporation, Apple and Tesla — and their involvement in and ability to assist drug development and discovery. Six of the seven already have healthcare initiatives, so the blend of technology and science continues.

With all of the concerns facing the industry, AI is being recognized more as a tool that can assist with streamlining processes for increased efficiency. This does not mean replacing humans, though. When posed a question about whether AI can solve the industry’s equity and access problems during the same panel, Jane Williams, vice president and head of neuroscience, rare disease and pediatrics at Syneos Health, replied, “Yes and no. AI is wonderful for the first pass, but you always need that human lens after you make that first analysis.” AI can come up with solutions, but the human lens needs to distill it to verify it makes sense for the patient. This is the common sentiment about AI. It is a tool; a tool that needs to be monitored by humans.

Any discussion about AI needs to have at least one sentence about data. As AI dominated panel discussions, data followed suit. As is rightly and often stated, data defines how effective AI will be. This is common knowledge. As AI investment continues to grow, so will the need for investments in better data collection.

2024 presents new innovations and new challenges. The themes mentioned above were topics that appeared in many discussions. As 2024 is an election year, it will be interesting to watch as biotech, pharma and tech companies continue to work together while the economic market continues to stabilize.

Lori Ellis is the head of insights at BioSpace. She analyzes and comments on industry trends for BioSpace and clients. Her current focus is on the ever-evolving impact of technology on the pharmaceutical industry. You can reach her at lori.ellis@biospace.com. Follow her on LinkedIn.

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