We began the new year in our last post with observations on a few trends in the biotech and pharmaceutical development world. We continue to look forward at the prospects for 2021 in areas like digital health, the continuing impact of COVID-19 on the healthcare industry, and the record growth in pharma investment.
Accelerated Growth in Digital Healthcare
The COVID-19 pandemic has spurred many changes in healthcare. One of the biggest relates to innovation in digital technologies applied to healthcare, a trend we expect to continue. We have previously commented on evolutions in healthcare delivery, clinical trial decentralization, and drug adherence monitoring.
A notable area of increased interest has been the use of digital tools for the remote tracking of patient health and response to treatment in clinical practice, as well as facilitating patient self-management of therapies, which should further propel the growth of home-based care models for both acute and chronic diseases. These innovative products are designed to deliver evidence-based, software-driven monitoring to prevent or manage a medical condition. After the initial breakthrough application of remote glucose monitoring devices like Dexcom’s CGM or Abbott’s Freestyle for management of diabetes, an increasing number of drugs are being developed in tandem with companion digital devices in further indications such as cardiovascular disease, neurological conditions, respiratory diseases, chronic kidney disease, osteoporosis, and beyond.
In some cases, remote patient monitoring is being specifically integrated alongside drug therapy, with a new drug being prescribed with a companion biosensor – like an armband or other wearable – that allows a physician to track relevant changes in the patient’s health and highlight the need for further intervention. Such monitoring would enable physicians to adjust dosing as needed, possibly spot other problems requiring attention, or forecast the risk of an emerging health issue. The potential for continuous clinical oversight is expected to be particularly useful for conditions like heart failure, where today only an estimated 1% of patients receive the optimal dose of medication.
We have written previously about the growth of digital apps for the treatment of mental health conditions. The field of digital therapeutics, where a software itself delivers the therapeutic intervention, also continues to see new applications and product introductions. Akili Interactive’s prescription video game for the treatment of children with ADHD received FDA approval in June 2020, and Nightware’s mobile sleep app to treat nightmares caused by PTSD was approved in November. Smartphone-controlled digital therapeutics to treat conditions like acute migraine and neurodegenerative disorders through neurostimulation are also in development by companies such as Theranica and Cognito.
Continued Impact of the COVID-19 Pandemic
The COVID-19 pandemic has posed significant challenges but has also highlighted opportunities for improving healthcare. The healthcare industry was in many ways caught by surprise and unprepared at the start of the pandemic. Today, questions about COVID-19 and its impacts remain and new challenges continue to arise, such as those posed by emerging viral mutations. There is a clear need for improved forecasting systems that quickly warn of shifting disease fronts and help health care providers, payers, community groups, and government agencies better deal with uncertainties. In addition to improving public health decision-making, better forecasting would also allow the healthcare industry to reshape business portfolios for greater diversity, financial stability, and future growth.
This effort will likely include a focus on reconstructing supply chains to operate with greater flexibility. In a recent survey by PwC, 94% of life sciences executives and 86% of health care provider executives said that improving the supply chain overall would be a top priority for 2021. Areas for improvement include increasing knowledge about the businesses that provide to a company’s suppliers, undertaking new collaborations that encompass an increased diversity of geographies and materials, and building supply chains that can be rapidly scaled up or down to meet changing needs, as well as melded into a more seamless workflow.
In 2020, the pandemic also exposed significant communications gaps between and among health care providers and public health agencies. The Centers for Medicare and Medicaid Services (CMS) issuance of a final rule on Interoperability and Patient Access is likely to renew efforts to address this issue in 2021, as it requires patient admission and discharge summaries to be sent to primary care providers. A further focus on electronic patient referrals under the agency’s Promoting Interoperability program will also give hospitals more incentives to break down communication barriers that limit optimum treatment by mandating that information and medical records are shared among a patient’s entire care team.
Hope for the eventual end of the COVID-19 pandemic arrived at the end of 2020 with positive Phase 3 clinical results and authorizations of the first vaccines and new therapies. We expect many more such products to reach the market in 2021, and it will be especially important for the industry to develop an arsenal of drugs with a variety of mechanisms of action, given that COVID-19 affects different people in different ways. We also expect continuing changes to clinical trials, as the pandemic has catalyzed better cooperation between regulatory agencies and drug developers, greater use of platform trials with aligned protocols that ease burdens on companies and regulators alike, and greater participation by historically under-represented patient populations.
The pharmaceutical industry’s success in quickly and effectively responding to the need for vaccines and treatments for COVID-19 has created a unique moment for the industry to strengthen its public image. Many around the world are watching to see how companies now deal with emerging ethics questions and challenges associated with COVID-19 vaccines and treatments and equitable public access, including for low-income countries. Other challenges remain, such as drug costs, that will likely continue to be a focus for the new Biden administration.
Surge in Healthcare Investment to Continue
Despite the pandemic, investment in the healthcare industry reached new heights during 2020. Silicon Valley Bank reported in its annual report that healthcare venture financing totaled a record $16.8 billion, marking the biggest year-over-year growth in nearly 10 years. While the number of venture investors did not grow, the size of the deals did, with the median deal size of $415 million nearly double the $217 million recorded in 2019. Healthcare investing in the public markets also soared, as IPOs hit a record 84 exits with a total value twice that of 2019 and the Nasdaq Biotechnology Index hit a new high.
Analysts are predicting strong investment growth for 2021 as well, in both venture rounds and another 50-60 IPOs. The first of these already have taken place on Nasdaq in January, with China-based CAR-T company Gracell Biotechnologies raising $209 million and Massachusetts-based Cullinan Oncology raising $249.9 million. Oncology and COVID-19 related research, especially vaccines, were the main beneficiaries of investor interest in 2019, and are likely to also be strong drivers in 2021. Other areas of likely growing investments are forecasted by many to include cell therapies, immunology, gene therapy, and potentially neurology.
Merger and acquisition activity began slowly in 2020 but picked up in the second half of the year with approximately $100 billion in biotech deals announced. Most notable of these, for both its $39 billion size and its focus, was AstraZeneca’s offer for Alexion. This deal, once closed, will mark AstraZeneca’s expansion into rare diseases, continuing the efforts to diversify first initiated when Pascal Soriot became CEO in 2014. AstraZeneca has been primarily focused on treatments for cancer, diabetes, and respiratory conditions. The acquisition of Alexion strengthens the company’s portfolio in immunology and adds Alexion’s complement inhibition pipeline addressed to immune-mediated rare diseases. The acquisition will also give AstraZeneca five new marketed specialty drugs, which had been forecasted by Alexion to total nearly $6 billion in sales for 2020.
Analysts are predicting that the increase in M&A activity will continue in 2021, as companies begin to reshape their businesses in response to the impacts of the COVID-19 pandemic. And indeed, at the start of the 2021 JP Morgan Healthcare Conference, Sanofi announced it was buying Kymab for $1.5 billion, adding the biotech’s promising drug candidate for atopic dermatitis as well as Kymab’s late-stage immuno-inflammation pipeline to its portfolio.