Key trends for 2020 - what's changing in the new decade

Time to shine for off-the-shelf options

While CAR-T and other bespoke treatments had been investor darlings, the bloom come off the rose as sales numbers remain disappointing for the leading therapies. Meanwhile, investors remain sceptical about the real world uptake for up-and-coming treatments like tumour-infiltrating lymphocytes (TILs) or neoantigen therapies, recognising the real-world barriers of reimbursement, waiting periods and patient access to the complex treatments.

Off-the-shelf options, be they universal cell therapies or more conventional treatments, are looking poised to take advantage of the hiccups in commercialisation experienced by products like Kymriah (tisagenlecleucel) and Yescarta (axicabtagene ciloleucel). Last year's American Society of Hematology (ASH) annual meeting illustrated the preponderance of bispecific antibodies that are hoping to take on CAR-T in various blood cancers, but the new decade will also feature showdowns between the convenience and cost of small molecules versus the longevity of genetic medicines in indications like sickle cell disease.

At the same time, new advances in allogeneic cell therapy will be looking to beat autologous products at their own game with universal cell products, as companies like Allogene Therapeutics, Rubius Therapeutics, Fate Therapeutics, CRISPR Therapeutics, and Precision BioSciences all face key tests of their off-the-shelf cell therapies.

China drives the bottom line

China's increasing incorporation of Western and multinational medicines into its reimbursement framework- exemplified by the steadily increasing rate of updates to National Reimbursement Drug List (NRDL)- has cemented the country's status as a key emerging market.

However, that hasn't come without growing pains, as the steep discounts required for access to the population haven't flagged over time; Evercore ISI's Umer Raffat emphasised that there seems to be a "disconnect between our industry's enthusiasm for China vs the sheer unpredictability on pricing as well as the scale of cuts on both older brands as well as novel products like Keytruda."

The new year is expected to bring in fresh NRDL updates, as well as continued expansion of the 'centralised procurement' bidding process that started in 2019 as a provincial pilot. Analysts at Jefferies are predicting that the impact of that centralised process will begin to be felt on balance sheets in the first quarter, as the pace of the bidding process quickens throughout 2020.

Drug pricing delays

With 2020 being a Presidential election year in the US, analysts are largely comfortable with the idea that any significant action on drug pricing will have to wait until 2021. Further, the absence of any ground-breaking changes in 2019 means the bullet has thus far been dodged, despite a President with vocal statements about drug pricing. Bernstein's Ronny Gal predicts an upside for biotech stocks should Republicans retake the Oval office, anticipating no significant changes in President Trump's inability to build a coalition capable of taking on the task. Should power shift to Democrats, Gal notes that few of the current candidates will have both the conviction and the coalition to drive changes, with Senator Elizabeth Warren as perhaps the most likely Democrat to execute on both points.

While any action on Capitol Hill could be stymied until next year, a few companies could become specific targets of public outcry. BioMarin Pharmaceuticals' gene therapy to treat haemophilia will be a likely flash point for pricing debates, analogous to 2019's approval of Zolgensma (onasemnogene abeparvovac). BioMarin submitted its BLA for valoctocogene roxaparvovec in December, which could mean an approval as early as mid-2020. Analysts are predicting a price tag of at least $1 million, likely tied to pay-for-performance schemes with insurers.

Other companies also face more targeted threats in 2020; Gilead Sciences will need to tread carefully in its litigation with the US Department of Health and Human Services (HHS) over patent protection for its HIV franchise, while companies like Amgen and Regeneron have high exposure to products covered by Medicare Part B, a low-hanging fruit for pricing reform.

M&A remains a hot ticket

2019 was a banner year for M&A, boosted by a $93-billion Celgene buyout and a spate of acquisitions in the gene therapy space. Analysts at JMP note that as the dust settles for 2020, there is still plenty of buying power to go around, should large caps choose to do so. They note that Gilead, Amgen and Johnson & Johnson have $20 billion or more in cash on hand- notably with Gilead under increasing pressure to make another big purchase in the absence of any inflection point for its Kite Pharma buyout.

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