Alex Philippidis Senior News Editor Genetic Engineering & Biotechnology News
New Year Marked by New Administration, New Concerns on Stocks, and the Promise of New Technologies
2017 offers more questions than answers when it comes to what the coming year holds for biopharma.
The biggest question: How will the incoming administration of Donald J. Trump reshape Washington’s relations with biopharma?
Heading into 2017, Team Trump had not said who it wants to lead the NIH and FDA. NIH Director Francis S. Collins, M.D., Ph.D., has said he remains open to staying on if the president-elect wishes, while FDA Commissioner Robert Califf, M.D., has not had any contact from Trump’s transition team, fueling speculation that he won’t stick around.
That speculation has also led to news reports about potential successors to Dr. Califf. One is Jim O’Neill, managing director at Mithril Capital Management, the investment firm co-founded by Trump ally Peter Thiel, a co-founder of PayPal. O’Neill in 2014 called for “progressive” approval of new drugs after their safety has been established, but before efficacy has been proven. Another reported potential nominee is Scott Gottlieb, M.D., who has more of a traditional background as a former FDA deputy commissioner.
Among the new administration’s challenges will be whether and how to carry out one post-election promise: “I’m going to bring down drug prices. I don’t like what’s happened with drug prices,” Trump told Time last month. Yet on its website, Trump’s transition team’s statement of “healthcare” goals includes two other, industry-friendlier policy priorities: “Advance research and development in healthcare,” and “Reform the [FDA], to put greater focus on the need of patients for new and innovative medical products.”
Trump has also proposed lowering from 35% to 10% the income tax rate of corporations that repatriate profits earned overseas, which is expected to fuel more merger-and-acquisition activity.
“People are looking at the business environment, and saying there will be less regulation, less pressure on drug pricing,” Michael A. Greeley, general partner at Flare Capital Partners, told GEN.
Concern Over Markets
But the rhetoric is creating volatility, Greeley said, namely investor expectations that Washington will give the biopharma industry a freer hand, justifying the higher valuations for publicly traded companies seen in recent months.
“Valuations have really raced ahead of fundamentals. And we need the fundamentals to catch up,” he said. “If you and I are talking in September and nothing has come to pass, I think there could be a pretty significant correction at the end of the year. I think the public markets would sell off pretty dramatically in the second half of the year if we're not seeing real fundamental movement on all these business-friendly promises.”
Morningstar analyst Damien Conover, CFA, says drug pricing will be the main driver for prices of biopharma stock in 2017, since it will weigh on valuations, especially for larger biopharmas. He expects pressure to contain prices will subside as public attention to recent pricing controversies such as Mylan’s 500%+ increase in EpiPen prices fades: “I think the sentiment will shift, and it will return to the innovation and the core drivers of really what drug prices do, and that’s improve health, improve outcomes, and actually lower healthcare prices in total.”
In a sign of bet-hedging on public markets, several private venture capital firms focused on biopharma have closed on new nine-figure funds in recent months, suggesting they are likelier to offer early-stage companies more financing rather than rely on initial public offerings, which declined in 2016. In December alone, Versant Ventures closed on a $400 million life sciences fund, while Flagship Pioneering (formerly Flagship Ventures) raised a $285 million Special Opportunities Fund.
“Many firms have recently raised new funds so we should expect to see continued strength in the quarterly funding numbers in 2017,” said Bruce Booth, a partner with Atlas Venture. “Whether or not the crossover public investors participate actively in private rounds, like they did in 2014-2015, will likely determine whether we see above-average fund flows.”
Rare Sign of Support
Washington moved in the direction of boosting biopharma last month when President Obama enacted the 21st Century Cures Act following overwhelming approval in the Senate and House of Representatives. The measure is designed to help speed up approval of new drugs and maintain U.S. leadership in research; one of its provisions calls for reauthorizing the priority review voucher program for rare pediatric diseases through 2020.
However, the enacted bill dropped an earlier provision that would have extended by six months the marketing exclusivity period for drugs if they were repurposed for new indications—and just as well, in the view of one rare disease drug developer.
“I’m not so sure that it was going to be as big a benefit in the orphan world as you might expect,” says Gur Roshwalb, M.D., CEO of Akari Therapeutics, a drug developer focused on treating severe and orphan autoimmune and inflammatory diseases. “When you’re repurposing a drug, the IP isn’t going to be quite as good, and then there’s the expense of just running a trial. Even in an orphan area, where you don’t need as many patients, and the drugs may be cheaper, there still has to be a good return on investment.”
“The question would be,” Dr. Roshwalb added, “Is that extra exclusivity of six months sufficient to really give you a positive net present value on money being spent?”
Cancer and CRISPR
2017 is also expected to bring the FDA’s first approval, or approvals, for cancer immunotherapies. Novartis has announced plans to file a BLA for its chimeric antigen receptor T-cell (CAR-T) therapy candidate CTL019 IN in relapsed/refractory (r/r) pediatric patients and young adults with B-cell acute lymphoblastic leukemia (ALL)., while Kite Pharma has begun a rolling submission of a BLA for its lead candidate KTE-C19 in patients with r/r aggressive B-cell non-Hodgkin lymphoma (NHL) who are ineligible for autologous stem cell transplant.
Further behind in the scramble to develop immuno-oncology treatments is Juno Therapeutics, which last year placed two clinical holds on its Phase II ROCKET trial assessing CAR-T candidate JCAR015 in adults with r/r B-cell ALL, following a combined five patient deaths. However, Juno last month presented positive preliminary data for another CAR-T candidate, JCAR017 in patients with r/r aggressive NHL, reporting an 80% overall response rate and a 60% complete response rate.
“Juno is in a very precarious situation right now, because if anything goes wrong with that JCAR017 program—the data has looked good so far, but it hasn’t been a lot of data—then they’re really in trouble. They really don’t have any room for error going forward,” said Brad Loncar, CEO of Loncar Investments.
Big pharmas will also have new immuno-oncology data coming out in 2017. AstraZeneca will report results from its Phase III MYSTIC trial assessing the combination of durvalumab and tremelimumab in first-line non-small cell lung cancer. BMS is also expected to read out data from a combination of its two marketed cancer drugs Opdivo® and Yervoy in frontline NSCLC later this year. In August, BMS failed a Phase III trial assessing Opdivo in patients with previously untreated advanced NSCLC.
Also on the technology front, a three-judge panel of the Patent Trial and Appeal Board is expected this year to decide whether an “interference” proceeding aimed at resolving the impasse can proceed, as declared in January by Administrative Patent Judge Deborah Katz of the U.S. Patent and Trademark Office. The panel last month heard oral arguments as part of an “interference” proceeding expected to run through 2017, and possibly beyond. UC Berkeley and Emmanuelle Charpentier, Ph.D., of the Helmholtz Centre for Infection Research are challenging 12 patents that list as inventor Feng Zhang, Ph.D., of the Broad Institute of MIT and Harvard.
CRISPR will also see the first U.S. clinical trial in get under way during 2017, to be led by the University of Pennsylvania, which won approval last year from the NIH’s Recombinant DNA Advisory Committee. The Penn-led trial still requires approval by the university review board, the FDA and the medical centers where it would be conducted.
The U.S. study will follow the world’s first human trial of CRISPR, which was launched in China on October 29 by You Lu, M.D., and colleagues at Sichuan University’s West China Hospital in Chengdu. Dr. Lu’s team will assess the effects of knocking out a gene encoding the programmed death protein 1 (PD-1) in patients with NSCLC.