Biotech Moves Forward With Cautious Optimism

HDMZ's in-depth analysis of the 2024 J.P. Morgan Healthcare Conference unveils trends — including pharma headwinds, AI and Wegovy — that will shape the life science industry this year

If you ever want to get a pulse on biotech and pharma, look no further than the annual JP Morgan Healthcare Conference in San Francisco (casually referred to as “JPM” by most). Arguably the marquee event for the industry, JPM draws nearly 50,000 healthcare professionals from all over the world to the Bay Area to not only meet investors and prospective business partners, but also witness firsthand the slew of head-turning company announcements and presentations on scientific advances that move the needle for patients. JPM is an incredibly hectic, yet energizing, spectacle that I always look forward to attending because it ultimately sets the tone and tenor for what to expect in the coming year.

2023 was a sobering year for the biotech industry: The disheartening backdrop of surging inflation, complex geopolitics, high interest rates, widespread company layoffs, and rising labor costs caused a noticeable tonal shift during last year’s JPM 2023 conference, in which the foreboding theme of macroeconomic uncertainty and restricted capital allocation took the wind out of biotech’s sails.

While some of that discouragement carried through to this year’s JPM conference, many attendees and thought leaders with whom we spoke are feeling “cautiously optimistic” about where the industry is headed in 2024.

In case you missed the conference, here is HDMZ’s analysis of the major topics discussed at JPM 2024 last week:

Big pharma purse strings open up; ADCs in vogue again

It’s no question that the economic downturn casted a chilling effect on capital markets, forcing investors to narrow their focus on more established companies with mature pipelines and clinical data to mitigate risk as they placed their bets. Thankfully, the industry experienced some reprieve during the latter half of 2023 through a handful of notable merger and acquisitions (M&As), partnerships, and even very respectable funding rounds for early-stage biotechs, such as Genesis Therapeutics’ oversubscribed $200 million Series B financing.

Fortunately, this positive trend continued into the new year as JPM 2024 kicked off with an array of significant M&A and partnership announcements as some big pharma companies seek to fill business pipeline gaps due to impending patent cliffs for flagship drugs. High-profile acquisitions that made JPM headlines this past week include GSK’s $1.4 billion buyout of asthma biotech Aiolos Bio, Merck’s $680 million purchase of T-cell engager Harpoon Therapeutics, and Novartis’ $250 million immunotherapy acquisition of Calypso Biotech, just to name a few.

More interestingly (and unsurprisingly), the antibody drug conjugate (ADC) resurgence that saw compelling momentum towards the end of 2023 only continued at JPM this year, with Johnson & Johnson purchasing Ambrx Biopharma in a $2 billion cash deal. Just days prior to JPM, Roche paid a $66 million upfront collaboration deal with Chinese ADC developer, MediLink Therapeutics.

In the minds of more bullish optimists, the uptick in M&A and partnership activity at JPM 2024 potentially signals a favorable turning of the tide (the XBI biotech exchange-traded fund rose as high as 6 percent over the course of the conference). 

But will all of this be enough to bring biotech back into the promised land this year?

​ 

Indeed, money is starting to flow again in our capital-intensive industry. However, the overall sentiment with JPM goers is that companies are going back to basic business fundamentals by focusing on execution and differentiation. In fact, the anticipated fierce competition for M&As and deal making has put an emphasis on the speed of corporate due diligence at some big pharma (days vs. weeks in some instances), since they know exactly who and what they need to purchase for their portfolios according to Glenn Hunzinger, PwC’s Pharmaceutical & Life Sciences Consulting Solutions Leader, during a panel discussion at the Endpoints News JPM 2024 event.

And for biotechs looking to partner or be acquired, being able to articulate the differentiating attributes of your therapy clearly is mission critical in the current era of “me too” drugs that only demonstrate incremental improvements according to Roche’s Global Head of Pharma Partnering, James Sabry. From HDMZ’s perspective, this only underscores the need to develop a thoughtful strategic messaging framework that properly positions a company’s science and technology to help early stage biotechs become attractive prospects to bolster big pharma’s corporate and R&D balance sheets.

All of this is to say that there may be a light at the end of the tunnel, albeit a slightly diffused one. As one executive from a biotech startup casually, and somewhat nervously, told HDMZ during a networking event, “It looks like the purse strings from big pharma and venture capitalists are starting to open up again. But will it be enough for early stage companies to brace against these challenging headwinds this year?”

AI in healthcare is here to stay, but is it ready for primetime?

You almost can’t throw a rock without hitting a biotech that squeezes artificial intelligence (AI) and machine learning (ML) into company presentations or boilerplates these days. Therefore, it was no surprise that AI/ML was a huge topic of interest in nearly every JPM 2024 panel discussion. This was only fueled by Isomorphic Labs’ big JPM splash, in which the AI-enabled drug discovery startup secured two major partnerships with Eli Lilly and Novartis to leverage its Google DeepMind-based AI platform. All together, the potential deal volume of the two pharma contracts is worth up to $2.9 billion in “biobucks,” further engendering confidence in AI’s potential.

​There is no doubt that AI is going to positively change the biotech and pharma landscape in immeasurable ways. For instance, AI-based automation will improve company processes at the corporate level by taking on rote tasks, such as writing regulatory documents or identifying company acquisition targets. At the drug discovery and development level, there are other more interesting AI use cases that go beyond conventional data mining and hit-to-lead time optimization, such as being able to turn qualitative data (e.g., patient interviews and experiences, images/video, etc.) into quantitative data, or running realistic simulations on personalized “virtual organs,” such as a digital version of one’s heart, to test drugs and medical devices before using them in any patient or clinical trial.

With that said, many JPM attendees acknowledge that the AI hype in biotech isn’t a completely rosy picture. Virtually all AI/ML platforms rely heavily on the integrity and quality of databases, which then feed into these algorithms to provide meaningful insights. So, if the biological or clinical data is poor to begin with, then it renders the AI useless. In other words, “Garbage in, then garbage out,” as Rezo Therapeutics’ president, Nevan Krogan, eloquently put it during a WuXi Global Forum panel at JPM 2024. 

Additionally, since AI tools need to constantly learn, re-learn (and re-learn again) from data,  it could take years for this class of technology to properly mature, and, thereafter, become actually useful for drug developers. This is a pill that some short-term investors may find difficult to swallow, especially in the context of long drawn-out drug development cycles (which, to be fair, is short-sighted in itself). When looking from an even more big picture view, most overly promising technology classes typically follow the same predictable three stages: (1) Initial hype, (2) realization of technological limitations, and (3) significant interest decline. Just look at a five-year stock chart of biotechs built on these emerging hyped-up technologies, and you’ll likely observe a similar cycle of very deep swings in share price over time. Nevertheless, it’s still very early days. So, whether AI/ML will buck this trend is anybody’s guess.

And we haven't even touched upon how regulatory authorities are going to think about AI and provide specific guidance in the drug discovery and development context, which is another whole topic of discussion in itself.

Although it may seem as if there are many challenging obstacles for AI in healthcare, they’re mere drops in the bucket when compared to the incredibly tremendous benefit that it can bring to truly revolutionize patient care. At HDMZ, we’re huge supporters of AI’s utility, and, therefore, will keep a very close eye on how this field will evolve in the near and long term.

Wegovy’s weight loss wonder sparks drug development frenzy

Fairly recently, the application of glucagon-like peptides, or GLPs (apparently also referred to as “glips” by folks on Wall Street), to combat weight gain — and the resultant landmark FDA approval and enormous commercial success of Novo Nordisk’s Wegovy — has created an unprecedented amount of attention and craze, effectively creating an entirely new class of cardiometabolic therapies. Many thought leaders at JPM expressed that this gold rush for new weight loss drugs injected much-needed energy and enthusiasm into a somewhat stagnant drug development commercial enterprise, in which nearly every big pharma under the sun is now rampantly exploring this area for its own pipelines. 

In many ways, we are experiencing the same fervor that was seen with the birth of other pivotal drug classes throughout history, including statins, immune checkpoint inhibitors, gene therapy and CRISPR-based genome editing. However, the race to create the next blockbuster weight-loss drug goes beyond just trying to be fashionable or chasing Wegovy’s financial success. There is serious and mature science behind this therapeutic category. During a JPM 2024 panel on GLPs, Karen Knudsen, CEO of the American Cancer Society, expressed excitement over how these weight-loss drugs will only have compounding downstream health benefits for patients, including lowering the incidence of other major diseases such as diabetes, and even cancer. During that same JPM panel, Joseph Wu, President of the American Heart Association, believes this can save the U.S. healthcare system immense amounts of money given that more than 40 percent of Americans are categorically obese. 

As for competing big pharma companies that missed the initial GLP wave, were they envious of Wegovy’s achievement? Quite the contrary. In fact, Myrtle Potter, Sumitomo Pharma America’s CEO, implored during a STAT News JPM 2024 panel that everyone should, instead, celebrate what Novo Nordisk ushered in, giving drug developers unparalleled opportunities to tackle the urgent obesity crisis in America. 

Closing thoughts

Now that the JPM 2024 dust has finally settled, it’s a wrap. But we have to ask, “Is all this ‘cautious optimism’ rhetoric, which was espoused throughout JPM 2024, a true turnkey moment in our industry? Or is it just a mechanism through which to keep key stakeholders satisfied?” All of this remains to be seen.  

Regardless of what happens, 2024 should be an interesting ride for biotech. Stay tuned as HDMZ continues to closely follow the sector to provide additional insights into where our amazing industry is headed.