Intro to US Life Sciences

Industry rises to the occasion

Shortly after winning the Nobel Prize in Chemistry, Jennifer Doudna commented that over the course of the pandemic, she was reflecting on Thomas Kuhn’s book “The Structure of Scientific Revolutions,” published in 1962. It made a compelling case for “paradigm shifts,” in which the accumulation of challenges to a supposed truth eventually overturns the accepted understanding of it. This seemed to explain the observation that scientific ideas and practice often bumble along for a while but then experience a rapid and substantial change that disrupts the regular way of working.

Over the past year, COVID-19 has upended lives around the world, leading to over 3 million deaths as of April 2021. At its peak, the US witnessed multiple days where its daily death rate reached historical highs exceeding that of 9/11.

The sense of desperation that came out of this necessitated a rethinking of what was previously considered possible. For many years, the life science industry has had breakthrough ideas bubbling under the surface, but accepted truths are difficult to change. For example, people took it as a given that it takes years to develop a vaccine, that virtual medicine will never scale for doctors or patients, and the regulatory system cannot adapt to innovation quickly enough to support lasting change. Over the past year, the US bio ecosystem turned this orthodoxy on its head, responding heroically, and faster than ever before in so many ways.

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“The past quarter-century has seen tremendous progress in biomedical research, leading to an increasing understanding of cancer, heart disease, diabetes and other devastating diseases. The nation has led the world in such progress, due in significant part to wise investments by the Federal Government in basic biomedical research. These breakthroughs are beginning to pay off in terms of new therapies for American patients.”

Christiana Bardon, Portfolio Manager, Burrage Capital

The rapid pace at which industry moved was enabled by decades of research by industry and academia, which formed the base for a mobilization never seen in the biological sciences. It rivaled the great efforts of the Manhattan Project and the Apollo moon program. The Russians even named their vaccine Sputnik, evoking memories of the space race. In the US, the Trump administration launched its vaccine taskforce named "Operation Warp Speed," an expression popularized by Star Trek.

Coincidentally, the most efficacious and trusted vaccines that are now being administered across the US and the world are mRNA vaccines, which not long ago were considered science fiction. Even as recently as one year ago, this technology still received skepticism and lacked validation.

Jonny Ohlson, executive chairman of Touchlight Genetics, commented: “A year ago we were telling people externally we thought that mRNA was going to become one of the biggest markets for our DNA platform, but that it needed a clinical inflection point. At that time, nobody was producing at scale, but the effect of COVID-19 was that these platforms were completely validated by the efforts of BioNTech and Moderna in getting vaccines to market.”

Messenger RNA is just one of several new modalities that are enabling a renaissance in biomedical progress. There are now tools for gene editing, cell therapy, microbiome, targeted protein degradation, both active site and allosteric small molecules, and even digital therapies. All of these modalities are giving the R&D community a differentiated toolkit to address distinctive conditions, which allows for tailoring and refining how we think about making new medicines.

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The life sciences sector is now at a stage where the promises of cell and gene therapies are being delivered to patients; rare diseases, previously believed to be incurable, are on the precipice of real cures, and artificial intelligence (AI) and machine-learning approaches are raising expectations that therapy discovery and development may not only be more innovative, but also more time and cost effective.

Tech to the rescue

Regeneron is an exemplar of many of these trends, as they were able to rapidly produce a COVID antibody cocktail leveraging their core capabilities for target discovery and validation enabled by a series of technologies that accelerate, improve and disrupt the traditional drug discovery and development process. Collectively, these technologies make up their VelociSuite platform, which played a pivotal role in treating former President Trump when he was hospitalized due to COVID in October. Robert Landry, CFO of Regeneron, outlined: “Thanks to three decades of investment in our antibody discovery and development technologies, as well as our recent experience developing a multi-antibody cocktail for Ebola, our team was ready to quickly mobilize when COVID-19 hit.”

The team ultimately moved its investigational antibody cocktail against SARS-CoV-2 from lab to clinic in record time. This process, which would normally take years, was achieved in under six months.

The development of Regeneron’s antibody cocktail and the fact that Moderna’s COVID-19 vaccine was designed in just 48 hours is astonishing. But they are not the only ones with impressive stories. 53 new drugs were approved by the FDA in 2020 (the second most of any year), across indications ranging from precision oncology to peanut allergy, many using innovative technologies that hold the promise of uniquely impacting patient lives.

Reaping what we sow

It should not be understated that the reason the US life sciences ecosystem was capable of responding in such rapid fashion is because of investments made decades earlier both by public institutions and private entities. Perhaps a silver lining of the pandemic is the amplified awareness by government officials and the public that the solutions in diagnostic testing, drug treatments and vaccines will come from industry as it translates basic science discoveries into safe and effective products. In a press conference this March, President Biden declared: “Back in the ‘60s, we used to invest a little over 2% of our entire GDP in pure research and investment in science. Today, it’s 0.7%. We’re going to change that.”

More specifically, Biden has detailed his view that industries such as artificial intelligence and biotech are central to sustaining America’s competitive position in the world, therefore warranting increased investments in medical research pertaining to insidious diseases such as cancer, Alzheimer’s and diabetes.

In addition to supportive funding to institutions such as the NIH, it is also essential that the FDA remains a priority. The FDA’s relationship with biotech has been a positive force for the industry, as they have shown that if there is a severe unmet medical need, they can work productively and collaboratively to get drugs out to patients as quickly as possible. Christiana Bardon, portfolio manager at Burrage Capital, noted: “We saw the FDA perform at “warp speed” for COVID. But the truth is, they have been doing that same day job for years with respect to cancer and other severe unmet medical needs.”

This was particularly true in the case of Amgen’s Blincyto, which was approved in under three months for pediatric Acute Lymphocytic Leukemia. “The FDA’s thinking is that every day that they do not approve a drug like Blincyto there is a child who may die of leukemia,” Bardon concluded.

Positive sentiment meets strong fundamentals

Given the widespread suffering from loss and lockdowns leading to historically high unemployment, one might have expected the business climate to suffer. It did to some extent, as some clinical trials were disrupted and remote sales posed major challenges, but things quickly rebounded as the year progressed. The life sciences industry, in particular, had several tailwinds at its back; namely a wave of positive sentiment from society and investors. As clinical trials for COVID treatments and vaccines hit milestones, and people realized life would continue, the life sciences industry was praised for its innovation and bright future, driving stock market indices like the XBI to all-time highs, outperforming nearly all other sectors.

In addition to positive sentiment, the fundamentals driving the industry over the long term have not changed. These fundamentals include aging demographics, incredible innovation and the supportive regulatory environment. From that perspective, the industry is creating many new drugs, which are going to go on to be approved and will be entering into a marketplace growing in medical need. Even more exciting is the fact that we still understand a fraction of human biology, thus there is no shortage of potential for farfetched breakthroughs.

As Arda Ural, Americas Industry Markets Leader, Health Sciences and Wellness at Ernst & Young, put it: “Unlike 2008-2009, this is not a fiscal crisis; it is a pandemic, and there is a lot of liquidity in the overall system.”

According to EY’s figures, biopharma alone, excluding private equity, possesses approximately US$1.5 trillion of liquidity to deploy. He continued: “Because of this underlying strength, valuations as evident by the S&P 500 Biotech or MedTech indexes, did not suffer at all. Consequently, IPOs and SPACs came back in a big way, and biotech IPOs are now at an all-time high.”

Writing the next chapter

As we have witnessed with previous crises, Congress’s positive view of pharma only lasts so long and eventually politicians will go back to vilifying the industry for its high prices and profits. Furthermore, capital markets will not always be as easy as they are today with well paved exit ramps leading to mergers and IPOs. Nevertheless, the far-reaching changes that the COVID-19 crisis has brought will outlast the pandemic and, in the long run, the US life sciences industry will positively alter the lives of many.

Image courtesy of Vedanta Biosicences / Bearwalk Cinema