Themes from BIO Europe

There’s far too much to share in one blog post, but there were three areas that I wanted to summarise as I think they’re a good indicator of the current state of the biopharma market and give us an insight into what we can expect from pharma and biotech in 2024. 

1. Dealmaking 
   Increasing competition is compressing the drug lifecycle and we’re now seeing peak sales occurring two years earlier than previous trends. Combined with decreased availability of and competition for late-stage assets, the shrinking developmental timeline is forcing dealmakers to look to pre and peri-PoC assets as the targets of acquisitions and licensing deals. Pharma companies are also undergoing a strategy shift, with many aiming to build the majority of their future pipelines through acquisitions and licensing, rather than through in-house research. The greater risk associated with earlier stage deals means that in order to be attractive to early investors, biotechs need to provide clear market differentiation, clinical viability and financial valuations for their early-stage products and programs. 
   
   The change in deal strategy is also impacting deal structures, with future early-stage deals favouring upfront cash and equity stakes. The cash will support the biotechs in their early research and company development by expanding the rest of their pipeline. The equity shares are attractive for demonstrating commitment to the partnership as well as allowing the investor to influence decision making in-line with their broader strategy. Overall, pharma were keen to announce that they had substantial funding available for early-stage investment in biotechs, however, biotechs seemed cautious about how readily accessible these funds would be and somewhat nervous at the prospect of such early-stage product valuations. 
2. Legislation 
   Two key legislative changes are also cause for concern in the industry. In the US, the Inflation Reduction Act (IRA) is set to have a significant impact on the sales value of small molecules, while forcing development to shift towards biologics and rare disease areas. The IRA also reduces a product’s time in market at full price and so put further pressure on developers to expedite clinical transitions and developmental timelines. This was something explored in our recent World Preview webinar and report. 
   
   In the EU, there are proposed legislative changes that reduce a products IP by two years unless they can launch in all 27 EU countries within 3 years. This has a big impact on product financial viability and would disproportionately impact small pharma who do not have the resources to individually target all 27 countries. As a result, small pharma would be more inclined to out-license to big pharma or to focus investment and development in US and Asian markets. 
3. AI 
   The general consensus was that AI will start to have a significant impact in the next 5-10 years, by reducing development costs by up to 40-60% and increasing likelihood of success by two to three times. A key change in developmental strategy is that AI investigates products from a mechanism of action and biomarker perspective, rather than disease based, enabling more diverse modalities to be considered. In the short term, however, the biggest impact from AI will be in driving efficiencies in workflows, simulations and patient analytics.