Each January, the J.P.Morgan (JPM) Health Care financial conference kicks off the New Year. The flurry of news announcements from across the world of biotech, pharma, medical devices, and health care delivery typically foretells some important trends for the coming months.
One notable difference for 2022 was the lack of blockbuster M&A announcements that have characterized the JPM conference in years past. While stock market valuations have dropped in recent weeks, premiums on acquisitions have increased greatly since 2000. Not only have there been an increased number of initial public offerings over the past two years, but there has been plenty of venture capital support for emerging companies. As a result, many businesses have been well-funded and less interested in mergers. A second factor influencing the downturn in M&A is the increasing number of companies focused on rare diseases or otherwise highly targeted indications with narrow labels, who are hoping to bring products to market on their own or via partnerships that allow them to participate in commercialization. Which leads us to the first of the trends we are watching for 2022: an emphasis on deals involving early stage technologies and products.
More Early-Stage Partnerships and Small Acquisitions
Instead of big mergers, many companies announced research partnerships and relatively small acquisitions during the JPM conference. These deals will allow large or rapidly growing pharma and biotech companies to gain access at relatively low cost to innovative but early-stage technology or to build in-house capabilities in areas of interest – most notably mRNA and cell therapy.
Pfizer, BioNTech, and Moderna – each flush with cash from their COVID-19 vaccine successes — announced deals aimed at strengthening their mRNA capabilities for vaccines, cancer, and other applications. Pfizer, in particular, enacted a trio of partnerships aimed at making the company an mRNA powerhouse. A small deal (terms undisclosed) with Acuitas gives Pfizer non-exclusive access to lipid nanoparticle delivery technology for up to 10 targets, for use in developing mRNA vaccines or therapeutics. A second partnership with Codex Biology ($8 million upfront and $90 million in milestones) provides Pfizer with access to Codex’s platform and strong intellectual property protections for rapid, automated synthesis of DNA and mRNA. The third, larger deal with Beam Therapeutics is a four-year research collaboration, with Pfizer paying $300 million upfront and up to $1.05 billion in milestones. This partnership will combine Beam’s in vivo base editing technology with Pfizer’s growing mRNA capabilities to treat three undisclosed genetic diseases affecting liver, muscle, and central nervous systems.
Moderna announced a partnership with Carisma Therapeutics, including a $45 million upfront payment and a $35 million investment in the latter, to focus on the development of Chimeric Antigen Receptor monocyte (CAR-M) therapies for cancer. After spinning out from bluebird bio, 2seventy bio has continued its partnership with Regeneron and the collaborators revealed that they have selected the first target for their joint CAR-T program for solid tumor cancers — MUC16, a protein found on most ovarian cancers. The companies project filing an IND for this program in 2023. In vivo gene editing appears to be an area of growing industry interest (Bayer also announced a related partnership with Mammoth Bio) that we will explore further in a future post.
While plenty of other early-stage research collaborations were announced, we find it notable that some of the largest and most cash-rich pharma companies, including Johnson & Johnson, Novartis, Merck, GlaxoSmithKline, and Eli Lilly, have so far remained on the sidelines. The firms are monitoring the emerging technology space but not as yet announcing any partnerships or licensing deals. We will be paying attention to them, especially as Novartis told audiences for Fierce’s JPM Week broadcast that they were interested in hearing from companies focused on such areas as genome engineering, next-generation biologics, molecular glues, and protein degradation.
Continued Impact of COVID-19 Pandemic
The COVID-19 pandemic has continued to be a driving force for therapeutics and especially vaccines development, and we’ve written previously about efforts by Pfizer, BioNTech and Moderna to create new vaccines for the Omicron variant, as well as those aimed at providing combination and pan-coronavirus protections. Sinovac, the leading vaccine maker in China, has also emerged as a global force in COVID-19 vaccine development. Their inactivated COVID-19 vaccine, based on technology similar to that used to create common vaccines for flu, hepatitis, polio, and rabies, is now the most widely used COVID vaccine worldwide – accounting for as much as 40% of all COVID vaccinations. COVID-19 isn’t going away and will remain an important stimulus for vaccine development, as boosters and new therapeutics will continue to be needed. Vaccines based on traditional technologies, such as the Sinovac product and Novavax’s recently approved subunit vaccine, may find greater acceptance from the vaccine-hesitant population than has been the case with mRNA vaccines.
More Growth in Innovative Care Models, Especially for Medicare Patients
Late last fall, we wrote about the rise of new primary health care delivery models aimed at improving both patient and physician satisfaction and quality of care while lowering overall health care costs. We discussed the regulatory and policy changes that have limited the ability of some of the new chains to serve Medicare patients, as well as the rise of a few – most notably Oak Street Health — to focus exclusively on Medicare and Medicare Advantage patients through a pilot risk-sharing program with the Centers for Medicare and Medicaid Services (CMS).
Agilon health, also focused exclusively on the Medicare market, described to JPM audiences a different approach. The company partners with existing local physician groups rather than building its own clinics, and aims to help them to improve care quality, outcomes, and cost, including through better integration with specialist referral networks and with care touchpoints outside the physician’s office. Citing the Akron, Ohio market as an example, the company says it has been able to achieve 90% patient compliance for cholesterol, hypertension, and diabetes medications, and a very significant, more than $100 per member per month cost savings.
Despite multiple other companies attempting to enter this area, the unmet need for affordable quality care for Medicare patients is so great that there is plenty of room for more competition. We will continue to watch this space with interest.