Alex Philippidis Senior News Editor Genetic Engineering & Biotechnology News
Unrest Signaled by Trump Win and Brexit Reflected in Stock and Deal Declines
With apologies to Charles Dickens, 2016 was neither the best of times for biopharma, nor the worst of times.
It sure looked like a horrible year last winter as investors sold off stock in droves, convinced that Hillary Clinton would defeat Donald Trump in the U.S. presidential election and fulfill campaign promises to contain drug prices.
That prospect—which Trump has occasionally articulated as well—was reinforced in June when federal prosecutors added to their case against Martin Shkreli, accusing him of concealing control of Retrophin stock; he pleaded not guilty. In August, Mylan CEO Heather Bresch joined Shkreli as a symbol of runaway Biopharma pricing after her company was found to have raised the price of its EpiPen (epinephrine) Auto-Injector for life-threatening allergic reactions 500+% since 2007.
Fear of government action on prices helped deflate the market for initial public offerings, which shrunk from last year. GEN research turned up at least 45 biopharma IPOs launched in 2016, compared with 88 the previous year—though 2016 still outperformed most of the last 10 years.
“By historical standards, 2016 was a strong year for the number of IPOs, albeit off the boom years of the 2013–2015 period,” Bruce Booth, D.Phil., a partner at Atlas Venture, told GEN. “Unless something dramatically changes in the macro capital markets, I expect 2017 will look like 2016: strong Biotech stories with good syndicates of investors will continue to be able to access the IPO markets.”
Wall Street Retreat
As 2016 ended, three key exchange-traded funds consisting of biopharma equities showed year-over-year declines, signaling continued investor coolness toward the industry. As of December 23, the iShares Nasdaq Biotechnology Exchange-Traded Fund (IBB) stood at $272.32, down nearly 20% from $338.70 a year earlier. The First Trust New York Stock Exchange Arca Biotech Fund (FBT) fell 16%, to $94.03; and the PowerShares Dynamic Pharmaceuticals ETF (PJP) closed at $56.51, down 21%.
Investors also retreated from venture capital investments in early-stage biopharmas. A total $5.3 billion in venture capital was invested in 305 companies between January and September, compared with $6 billion in 371 in the first nine months of 2015, according to the quarterly MoneyTree™ Report published by PricewaterhouseCoopers (PwC), based on data from Thomson Reuters.
Early-stage financing has since picked up steam, with the year’s top three financings occurring since September. Moderna Therapeutics won the year’s largest VC award, saying on September 7 that it raised $474 million in equity, growing its available cash to $1.4 billion.
While IPO and VC numbers dipped, Biopharma still saw numerous merger-and-acquisition (M&A) deals during 2016, paced by Pfizer’s $14 billion acquisition of Medivation, a deal intended to catapult the buyer to leadership in cancer therapies. Another oncology-focused megadeal had AbbVie acquiring Stemcentrx for up to $9.8 billion.
Close, But No Deal
However, the biggest merger planned for 2016 never happened. Pfizer was set to acquire Allergan for $160 billion but terminated the transaction in April, 2 days after the Obama administration issued rules designed to discourage the deal and other tax-slicing “inversion” mergers.
Biotech M&A in Europe slowed down due to the U.K.’s June Brexit vote to leave the EU. An October report by MergerMarket counted 96 deals totaling $9.5 billion announced in Europe during the third quarter—down 51.1% in value and 25% in number of deals, from 128 deals totaling $19.4 billion in Q2. However, the global commercial law firm Squire Patton Boggs noted that Biotech and Pharma were among sectors that “look to have weathered the current uncertainty more smoothly than others.”
Market fluctuations didn’t stop some of Silicon Valley’s most successful entrepreneurs-turned-philanthropists from betting billions and millions on biopharma research. In September, Facebook’s founder, chairman, and CEO Mark Zuckerberg, and his wife Priscilla Chan, M.D., pledged $3 billion over the next decade toward curing, preventing, or managing all diseases by the end of the century.
Napster co-founder Sean Parker awarded a $250 million grant to launch the Parker Institute for Cancer Immunotherapy in April, bringing together more than 300 researchers across six cancer centers. A month earlier, Microsoft co-founder Paul G. Allen committed $100 million toward a 10-year plan focused on exploring and funding cutting-edge bioscience.
Cancer Moonshot Blasts Off
Also committing billions to research were President Barack Obama and Congress. On December 13, Obama enacted the 21st Century Cures Act, following overwhelming passage in the Senate and House of Representatives. The law includes $4.8 billion for three Obama administration research efforts: The Precision Medicine Initiative ($1.4 billion), the BRAIN initiative ($1.6 billion), and the Cancer Moonshot ($1.8 billion).
Obama launched the Moonshot in January, naming Vice President Joe Biden to helm the effort aimed at doubling the pace of progress in cancer prevention, diagnosis, and treatment over the next five years.
“The Cancer Moonshot Initiative has inspired Americans to support a robust and sustainable cancer research program and provided another avenue for the cancer community to join together in our fight against cancer,” American Society of Clinical Oncology (ASCO) President Daniel F. Hayes, M.D., told GEN sister publication Clinical OMICs in October.
Cancer immunotherapy offered some of the year’s most promising R&D, with Novartis and Kite Pharma reporting positive results from trials of their immuno-oncology candidates.
Novartis on December 5 reported positive interim data from the global registrational Phase II ELIANA study of its chimeric antigen receptor T-cell (CAR T) therapy candidate CTL019, in relapsed/refractory (r/r) pediatric patients and young adults with B-cell acute lymphoblastic leukemia (ALL). The study showed that 41 out of 50 (82%) patients achieved complete remission, or complete remission with incomplete blood count recovery, at three months post-infusion. A BLA is planned for next year.
“I think Novartis is a slam dunk,” said Brad Loncar, CEO of Loncar Investments. “They have six-month data, and it was 60% complete response rate at the six-month mark. That’s very meaningful for that patient population. I think that one’s a given.”
The pharma giant presented its results at the American Society of Hematology meeting a day after Kite said it began a rolling submission with the FDA of its own BLA for lead candidate KTE-C19 in patients with r/r aggressive B-cell non-Hodgkin lymphoma (NHL) who are ineligible for autologous stem cell transplant. Three months earlier, Kite reported positive topline data for KTE-C19, meeting the ZUMA-1 trial’s primary endpoint of objective response rate to the treatment, with a combined ORR of 79%, including 52% complete remission, in two cohorts of patients with chemorefractory aggressive NHL.
“It doesn’t really matter how you start a rolling application. What matters is how you finish it,” Loncar said. That will depend, he said, on final six-month data that Kite is expected to release in the new year.
Setbacks, Sanctions, and Strife
Kite and Novartis have advanced in a crowded field that includes Juno Therapeutics—which saw two tragic setbacks to one of its CAR-T candidates during 2016. On November 23, Juno placed a clinical hold on the Phase II ROCKET trial assessing JCAR015 in adults with r/r B-cell ALL, following the deaths of two additional patients from cerebral edema. It was the second hold in five months. The first occurred in July, following the disclosure that three patients had died.
Theranos saw trouble of another sort over claims that its diagnostic technology could run scores of tests using drops of blood. The Centers for Medicare & Medicaid Services (CMS) in July imposed sanctions that included revoking the CLIA certificate of the company’s Newark, CA, lab, and banning CEO Elizabeth Holmes from owning, operating, or directing a lab for at least 2 years. Theranos is appealing the penalties, arguing that it made substantial progress toward correcting problems identified by CMS—but laid off 43% of its workforce in October.
Another potentially dazzling technology, CRISPR gene editing, remains at the center of a messy patent battle royal. In December, a three-judge panel of the Patent Trial and Appeal Board heard oral arguments in an “interference” proceeding designed to resolve the question of who invented CRISPR. 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.
“To a certain extent, it puts the technology or the industry on hold. I don’t think this is going to be finally decided for a couple of years,” Lisa Haile, J.D., Ph.D., a partner at the law firm DLA Piper, said in January.