5 Disruptive Forces Shaping Biotech

Biotech is an ever-evolving sector, with a rapidly changing equities landscape and proliferating new technologies that make investor selection of top picks challenging. By analyzing the bigger picture, examining existential threats and monitoring competitive landscapes, our RBC Imagine^TM Game Changers report aims to help decision-makers assess whether a franchise is likely to be sustainable. As we look ahead, we believe these five key forces will be most disruptive in 2022.

1. COVID-19 less dominant, but still a force to reckon with

Although the Omicron variant remains disruptive in South Korea, China and other Asian countries in the near-term, it’s clear that the immediate impacts of the global pandemic are fading as it moves to a more endemic state this year. However, there remain long-term secondary effects that could influence pharmas for years to come. There are signs of reduced prescription drug use in the U.S., likely down due to strains on the healthcare system that deprioritize diagnoses and harder-to administer drugs, and it’s not clear when the backlog of patients will clear.

Meanwhile, the shift to telemedicine that’s been accelerated by the pandemic will influence the sector for the foreseeable future. Telemedicine offers convenience to patients and doctors, and cost efficiencies, but the dynamics of care may fundamentally change as the offering expands and evolves. Diseases best diagnosed during a physical exam may be missed, prescribers may be less willing to switch medications with less patient observations, and decreased in-person detailing may continue to impede new launches. Some recent drug launches have been underperforming expectations, but we do expect biopharma to adapt to telehealth, so adverse impacts may be shortlived.

2. Patent waivers

Another secondary effect of the pandemic is the potential for patent waivers on COVID-19 vaccines. Both the Biden administration and the World Trade Organization have backed these proposals, which could set a precedent for future crises and have an outsized impact on certain disease areas such as HIV, Hepatitis C and rare or orphan diseases.

However, support in Europe is varied, with Germany in particular appearing reluctant to support IP waiver proposals, which may be enough to derail the plan. Even here in the U.S., despite continued pressure from progressive Democrats, little progress has been made on advancing the patent waiver by President Biden.

3. Gene editing maturing into a tangible competitive force

In vivo gene editing is the next evolution of the technology and holds the potential to find and fix mutations that cause cancer, some infectious diseases and a host of rare genetic disorders with high durability and efficiency. If successful, gene editing could supplant gene therapy and antisense knockdown approaches, which would be revolutionary in genetic medicine.

However, there are mitigating factors that remain unclear. Efficacy in larger trials could decrease, which would mean there are only incremental advantages in gene editing over simpler and more scalable technologies. As it’s early days for the technology, long-term safety is not well characterized, which may put patients off. And currently, while pharmas are focusing on liver delivery, there will be some additional work needed to re-engineer for other tissues.

4. New treatments in psychiatry

Psychiatric disorders are another area where novel single administration or short course therapies are being researched that could reshape the market for chronic treatments. There is already significant competition in this market, and the arrival of one-off treatments for major depressive disorders, for example, could be revolutionary.

However, there are barriers. Entrenchment of the chronic treatment paradigm may be difficult to change, especially if durability of acute treatments remains challenging to benchmark and generics stay affordable. Some of the new mechanisms have not quite lived up to their promise. And, due to side effects and scheduling, any psychedelic therapies are likely to be relegated to office visits, which may be a burden for patent uptake and compliance.

5. HIV and Alzheimer’s: Key breakthroughs, mixed consequences

HIV is edging closer to possible cures, as broadly neutralizing antibodies, immune activation or preventative vaccines could eradicate the need for drugs used today for viral suppression. Both possibilities have potential negative factors to consider. Cure approaches are still in the early stages, and there may be safety and efficacy limitations when translating data from non-human primate models to humans. Meanwhile, vaccine efforts continue to struggle with generating broad neutralizing antibodies across multiple strains. However, in the long term, this research has to be acknowledged when looking at pharmas in this sector.

Alzheimer’s has already had its big moment with the approval of Aduhelm in 2021, but despite launching with mega-blockbuster expectations – an estimated $10bn+ in peak worldwide sales – it’s been plagued with controversy. The accelerated approval pathway for Aduhelm caused a break in the traditional approval and access pattern, with Medicare restricting access. But additional data from other drugs in the coming years may help determine the viability of the approach.