The 2018 JP Morgan Healthcare Conference – What to watch

Held in San Francisco every January, the annual JP Morgan Healthcare Conference – now in its 36th year – often sets the tone in the pharmaceutical and biotech sectors for the year ahead. FirstWord will be in attendance next week (January 8-11) and ahead of the meeting we asked a number of investors what they will be focused on.

Catch-up plays in cell and gene therapy

Last year witnessed significant developments in cell- and gene-therapy, including FDA approval of the first two CAR-T products (Novartis’ Kymriah and Gilead Sciences’ Yescarta) and the first bone-fide gene therapy (Spark Therapeutics’ Luxturna). Investors will be hoping to gain some insight into the early commercial performance of Kymriah and Yescarta, while Spark announced pricing for its one-time retinal dystrophy treatment this week; its $850 000 price tag is certain to be the source of debate.

Brad Loncar, CEO of Loncar Investments, believes this year’s conference will act as the backdrop for deal making in this space. "Some large companies have missed the trend entirely and need to play catch up," he argues.

A Chinese new year

Johnson & Johnson’s recently announced licensing deal with Legend Biotech – for the B-cell maturation antigen (BCMA)-targeting CAR-T LCAR-B38M – supports Loncar’s argument and also highlights another of his predictions for JP Morgan 2018; continued emergence of the Chinese biotech sector. "Look for there to be a lot of announcements about Chinese companies in-licensing new assets for their domestic market," he predicts.

See ViewPoints: Johnson & Johnson’s big BCMA bet puts Celgene back in the crosshairs and ViewPoints: China biotech picks up steam heading into 2018

An M&A revival

The broader theme of M&A is omnipresent at the JP Morgan conference and this year will be no exception. Indeed, with a relative dearth of activity in 2017 expectations on this front are high. "It feels like all the pieces are in place for more M&A to happen in 2018," says Erik Otto, a biotech investor, consultant and previously CEO of InSpark Technologies.

"There are no immediate legislative headwinds, there is a favourable regulatory environment, and the tax bill will allow for huge amounts of cash from overseas to be repatriated to the US. The big question for big pharma and biotech is going to be are you going to buy companies with all that cash or are you going to use it for something else, like share buybacks," says Otto.

Analysts at Barclays suggest oncology, rare disease and neuroscience are the three therapeutic categories mostly likely to be targeted with M&A. Joep Muijrers, a partner at the venture capitak firm LSP, suggests "cash repatriation, in combination with the significant balance sheets and stalling growth at large caps, create an almost perfect storm for M&A activity targeting small and mid caps. I would love to hear a first 2018 deal announced next week."

The Celgene factor

Loncar will also be watching for any hints from the sector’s larger players as to what impact the tax reform bill will have on their M&A aspirations. Celgene has already hinted at acquisitive activity in 2018 and the bellwether biotech will continue its tradition of being the first company to present at the conference when it updates investors at 8am on Monday morning.

Management has typically provided full year guidance and pre-announced fourth quarter results at the conference and is likely to continue this trend next week. However, investors must be mindful of a conservative outlook warn analysts, following cuts to Celgene’s long term revenue guidance last year and a spate of development setbacks.

As analysts at Bernstein noted earlier this week, "part of the excitement around Celgene is the ‘bet on innovation’ – management is focused on identifying promising targets early and is not afraid to invest heavily to obtain them. However, some of that shine has eroded recently." Efforts to rebuild credibility through further deal making could be a boon to smaller biotech companies, particularly if Celgene acts as an M&A trend setter in 2018.

Some analysts argue that additional M&A momentum could be provided by a lack of late-stage clinical catalysts among other large cap biotech companies in 2018, meaning that Alexion, Biogen and Gilead should also be viewed as potential acquirers.

A redefinition of targeted cancer therapies

Of the deals that happened in the closing weeks of 2017, two highlight an important trend in cancer drug development; the shift towards therapies that are targeted at specific tumour mutations irrespective of histology. In November, Bayer in-licensed development and marketing rights for Loxo Oncology’s larotrectinib and last month Roche announced that it will acquire Ignyta (which is developing a similar drug) for $1.7 billion – see ViewPoints: For Ignyta, revenge is best served cold

These deals show the increased interest in such an approach, says Otto, meaning that other companies which have shown promising early clinical data with similar products – such as Blueprint Medicines, Spectrum Pharmaceuticals, Kura Oncology and Mirati Therapeutics – should garner more attention in and around next week’s meeting. "This area will be heavily discussed and many will be talking about the next promising target or clinical data readouts," suggests Otto.

The next phase in immuno-oncology

The explosion in immuno-oncology development over the last few years may be in danger of outpacing itself if the sheer number of ongoing clinical trials is anything to go by. Therefore, significant focus will be sharpened on emerging clinical approaches in this field, which offer potential differentiation versus competitors. Turning ‘cold’ tumours ‘hot’ – i.e. increasing response rates in tumour types, which have previously been resistant to immuno-therapy – is one such approach that Otto is looking to learn more about at JPM18.

Venture capital funding in rude health

The potential to widen use of immunotherapies also sits at the crux of BioNTech’s $270-million fundraising, which was announced on Thursday; the company – Europe’s largest privately held biotech company – can boast development efforts in the red-hot areas of messenger RNA and CAR-T. It is using the former to develop a personalised cancer vaccine which could be used to increase response rates to agents such as the PD-1 and PD-L1 inhibitors.

A focus on mRNA now supports reported valuation of three of the five highest valued private biotech companies globally, with BioNTech’s fundraising the third largest series A of all time (and significantly bigger than 2017’s largest series A, the $150 million raised by Cullian Oncology).

And BioNTech is the cherry on top; there has been strong momentum in venture capital fund raising  this week leading into JP Morgan, with an additional $500 million-plus raised by the likes of Oculis, Scholar Rock, Centrexion, NexImmune, newly launched Generation Bio, Enterome  and Stoke Therapeutics.

Pharma Trumped again?

What could dampen the mood in San Francisco? (aside from the weather forecast) – Last year’s meeting was a game of two halves with early optimism eroded by then recently-elected President Trump’s tweeted claim that pharma was “getting away with murder,” because of drug prices.

The pricing issue will not go away; a handful of companies have seen their recent decision to implement marginally sub-10 percent list price increases scrutinised; but public debate looks unlikely to reach the fever pitch of 2015, despite mid-term elections later this year. Regarding the President, his attention is likely to be elsewhere currently.

Further reading…

Key pharma and biotech trends for 2018

The drugs that will shape 2018

The class of 2017 – this year's biggest new drug approvals

To read more ViewPoints articles, click here.

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