Confidence of pharmacy CEOs exceeds pre-pandemic levels, companies turn to nucleic acid technology assets to fuel growth

We spoke with Jeff Stoll, KPMG’s US Life Sciences Strategy Leader, to get his thoughts on why the C-suite reps of pharmaceutical players [with over US$500m a year in revenue] express such optimism about the outlook for the industry over the next three years.

Did the pandemic then have a great influence on their prospects?

“In fact, COVID-19 is only a small aspect of it all. Certainly, this has greatly benefited companies like Moderna and BioNTech. They have grown in leaps and bounds; if the pandemic hadn’t happened, it would still be relatively small biotech companies. Moderna was mid-sized in terms of capitalization but had no business income prior to COVID-19. The pandemic has turned these companies into much bigger players in the biotech space, and it has really accelerated the mRNA platform, turning it into a commercially viable platform, which was not the case before. COVID-19 ”,said the analyst.

However, in terms of the confidence of CEOs in the pharmaceutical industry surpassing pre-pandemic levels and the strong appetite for mergers and acquisitions in the industry at large, he said several factors are behind these developments:

“First, we are in an era of significant innovation in the pharmaceutical industry. If you look through R&D work in genomics, proteomics, and drug targeting, as well as what’s going on around cytokines, in cell and gene therapies, and developments in nucleic acid technology, there is increasing maturity and understanding of how to use these technologies and develop drugs rapidly is [at a level] never seen before.

“Indeed, the global pharmaceutical pipeline is now larger than it has ever been in the history of the industry. And, in fact, if you look at these more complex or next-gen technologies, all these nucleic acid therapies, the size of that pipeline is bigger than the mAb biologics one, and it is growing at a faster rate. “

KPMG Pharma survey results

KPMG interviewed executives from around the world in 11 distinct industries. The number of pharmaceutical / biotech participants in the survey, conducted in July and August 2021, exceeded 90.

Here are some of the key findings from the survey of CEOs of pharmaceutical companies:

96% are confident in their company’s prospects for the next three years, compared to 75% in 2020 and 95% in 2019. Some 88% are confident in their industry’s prospects for the next three years compared to 70% in 2020 and 83 % in 2019.

In terms of the main risks for pharmaceutical companies in 2021, respondents identified the following:

  • Supply chain risk (17%)
  • Risk related to environmental / climate change (16%)
  • Operational risk (15%)

Only 4% said they are unlikely to make acquisitions compared to 16% in 2020 and 20% in 2019.

When it comes to business purpose priorities, 42% said they would focus on rewarding and inducing people and 15% would prioritize communicating performance to investors and stakeholders. Institutional investors were seen as the main drivers of better ESG reporting by the majority of CEOs in the pharmaceutical industry.

When it comes to cybersecurity readiness, 57% of respondents say they are well prepared, compared to 38% the previous year. Those who claim to be “Very well prepared”Was stable at 11%, but down from 29% in 2019.

Capital flows

Along with the explosion of innovation, the capital available to fund early-stage and late-stage research is more important than ever, Stoll said.

Since capital is relatively cheap, he continued, there has been a huge flow of funds as well as enabling services in the pharmaceutical industry.

The convergence of money and innovation therefore creates this exciting environment.

So when the biggest pharmaceutical and biotech companies assess where the growth is likely to come from over the next five to ten years, and what kinds of technologies they need to have to maintain a competitive advantage, whether in oncology or rare diseases , it’s really focused on nucleic acid therapies.

“Everyone is rushing around and trying to find ways to access this kind of technology and realize that they are going to have to transform their R&D and manufacturing capabilities if they are to develop such therapies.”

At the same time, other categories of innovation are proving to be attractive. Antibody-drug conjugates (ADCs) are now commercially viable and the market is really dynamic, after about 15 to 20 years of development, he said. “We are seeing something similar in the area of ​​cytokine-based therapy ”, added Stoll.

“Big companies see that they have to make acquisitions or creative deal structures that give them access to start-up assets.”

As long as there is reasonable pricing power in the United States, interest rate M&A activity will not slow down, the analyst stressed.

“The United States is, in many ways, allowing innovation around a lot of this technology, so as long as that is in play, you will see the pharmaceutical industry thrive and be able to create these deals. . “

“It’s an arms race”

Leaders believe they need to keep learning new skills in order to be still relevant ten years later. “In oncology, it’s essentially a massive arms race. Everyone is trying to build their portfolio in this space because it is so competitive. “

All of these developments, of course, will continue to support the growth of the CDMO space.

“The number of deals and investments we’ve seen in the Development and Contract Manufacturing (CDMO) industry has been huge and I don’t think it’s slowing down. We know there is a huge capacity issue around viral vectors, the making of plasmids, and some of the other raw materials needed for cell and gene therapies, and organizations are rallying to try to find ways to address this. demand. “

Head winds

What about recent gene therapy woes, have some recent clinical takes in this segment shaken confidence in advanced therapies?

“Gene therapy is just one part of the category. There was a little headwind emerging, in that there were safety signals. Perhaps AAV-based therapies will not be as effective as we thought or limited to certain populations. But that doesn’t mean we won’t find engineering ways around [such challenges], there are emerging non-viral approaches as well as a wide range of upcoming technologies designed to circumvent the limitations of AAV.

The threat of new drug pricing legislation still hangs over US industry, he said.

A report from KPMG in April, Trends in biopharmaceutical agreements, Noted how the industry is moving away from medicine for large populations in favor of smaller specialty areas like cancer and other rare diseases, and that for pharmaceutical companies to pursue the development of life-saving therapies for small populations, they must price drugs at high prices given the massive investments required in innovative R&D, new manufacturing capabilities and supply chain demands. “Policymakers will need to strike a balance between the goal of controlling drug price increases for consumers and their interest in encouraging the pharmaceutical industry to continue to develop innovative drugs.”

Process control

And what is the current demand for tools that offer improved process control, and to what extent is such technology a growth engine?

“There’s a ton of appetite to try to improve efficiency, to improve capabilities to target more effectively and faster, to have better quality controls with better analytics. Phone [process improvements] are certainly a big part of the growth that is happening in the industry right now. Analytics is another broad area of ​​investing that we see private equity and other players investing in. You see the pharmaceutical companies investing in it.

“The challenge, however, is that many [bioprocess control technology] is still at a very nascent stage and I would say there is a lot of noise around AI, machine learning and analytics surrounding them. There are so many different niche players claiming to have something special and unique in terms of capacity and the pharmaceutical industry is filtering it out right now, just trying to figure out what technology is. [robust] and what is not.


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Norma A. Roth