Your 2023 wildcard predictions revealed

Will biotech lead a bull market recovery? Will Novartis spin off its cell therapy business? Read on for some of your leftfield predictions for biopharma.

As part of Evaluate Vantage’s 2023 preview we asked our readers for some of their wildest predictions for the sector. While certain scenarios are unlikely to unfold – the gene-editing sector is heading for collapse, anyone? – some off-the-wall projections are worth contemplating.

Last year’s edition of this exercise, for example, predicted the success of lecanemab’s Clarity-AD trial, which 12 months ago felt wildly optimistic. So what else might emerge from the leftfield to knock biopharma off course, or take it in a new direction?

These answers were submitted as part of a poll designed to gauge opinions about IPOs, M&A and market sentiment. Around 150 investors, bankers and industry employees responded; answers were anonymous.

Market conditions

In all likelihood biopharma’s position next year will be similar to where it finds itself now: grappling with tough market conditions and rising cost of capital. As such, most of your leftfield predictions in this vein involved a much faster than expected recovery.

A very strong performance for biotech, which leads the markets out of a downturn; no major recession; Nasdaq takes off; a series of $1bn+ start-ups emerge – unfortunately, optimistic takes like these must for now be taken as unlikely scenarios.

Many respondents could not even bring themselves to forecast a recovery. Predictions also included an uptick in down rounds and valuation corrections, a die-off of companies that IPO’d with a preclinical pipeline and high valuation, and an increasingly conservative stance by risk-capital firms. Few would consider these prospects outlandish.

Some noted that biotech is “uninvestable” unless new US laws around drug pricing, as part of the Inflation Reduction Act, change. Predictions in this area involved either complete reversal of IRA, or substantial strengthening – the status quo is presumably the consensus view here.

And what about the FDA? The influential US regulator has been tightening up control of accelerated approvals this year, and raising eyebrows with a pullback in novel drug approvals. The outside-the-box view here is for another big drop in green lights in 2023.

M&A and strategy

Predictions for a changing of the guard at the top of big pharma proved popular – although again these are perhaps not particularly leftfield. Our respondents consider vulnerable the positions of Emma Walmsley, Paul Hudson and Vas Narasimhan, respectively the chief executives of GSK, Sanofi and Novartis.

Changes at the Swiss major were popular predictions – which perhaps make news more likely. Transforming M&A and the spinning off of its cell therapy business were cited as leftfield moves for Novartis.

A big pharma merger, for example of GSK and Astrazeneca, was another wildcard prediction. As was the opposite for Sanofi: a split into Sanofi and Pasteur. A declaration by Pfizer that “we’re heading into an era of big drugs and big M&A”, as one respondent proposed, certainly sounds counter to the group’s stated strategy. On the other hand, the group willingly spent its Covid cash in 2022.

Another popular long-shot theme was a big step up in M&A activity by private equity, to roll up cash-strapped or failing microcaps. Private equity’s preference for cash inflows over outflows makes this unlikely, their recent inroads into the venture world notwithstanding.

Your specific M&A predictions are detailed in the Preview – which is free to download here.

In the clinic?

Where might R&D be heading? Several replies contained predictions about the direction of immuno-oncology, with a resurgence of interest in CTLA-4 as a target apparently considered leftfield. The emergence of “another hot IO target” was another proposal, as was a strong decrease in IO investments.

Progress in immuno-oncology has arguably not kept up with the sums invested in the last few years, and it is probably true to say that tangible advances will be required soon to keep the money flowing.

“Oncolytics makes a huge splash” would be notable given the struggles in this space, as well as “cell therapy breakthrough in solid tumours”.  A big fail in cell therapy was another leftfield proposal, along with: “Progress in solid tumour treatment.... leftfield because I'm wrong every year!”

Outside of oncology, a long-term safety concern for the GLP-1/GIP class would certainly shake the sector – this is the class to which Lilly’s Mounjaro belongs, and a few other projects in the pipeline, where a huge future is predicted.

Whatever next year looks like, it is bound to throw the sector some curveballs. No one will want to see another pandemic, as some of you posited. Some scenarios detailed here are more likely than others – but Arsenal winning the Premier League? You know who you are…

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