How can we incentivize innovation? Wall Street, Washington insiders, and biotechs discuss.

February 11, 2020
We’re seeing an “extraordinary level” of biotech innovation, said BIO Chair Jeremy Levin, CEO of Ovid Therapeutics Inc., while kicking off the 22nd BIO CEO & Investor Conference on February 10th in New York. Day #1 of the conference featured discussions on the…
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We’re seeing an “extraordinary level” of biotech innovation, said BIO Chair Jeremy Levin, CEO of Ovid Therapeutics Inc., while kicking off the 22nd BIO CEO & Investor Conference on February 10th in New York.

Day #1 of the conference featured discussions on the breakthrough therapies of the future. But alongside the exciting science are very real challenges: low public perception of the industry, political chaos, industry consolidation geopolitical challenges, and of course, incentivizing the development and investment in breakthrough cures.

How do we incentivize funding for these new cures and ensure policy supports bringing them to market?

Wall Street investors, Washington experts, and innovative CEOs and scientists from around the world provided some ideas, but one thing’s clear: both the scientists and the policymakers must put patients first.

Here’s a look at the opportunities and challenges ahead, in this special edition of Good Day BIO on the Road, in just over 1,000 words, which you can read in about 5 minutes.

The Wall Street outlook

 
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As BIO CEO Jim Greenwood says, “the science is galloping forward”—and this science was on full display at #BIOCEO20, as companies researching everything from precision oncology to treatments for cardiovascular and regenerative diseases and breakthrough gene therapies pitched to investors. 

What’s driving investment? Last year, the core drivers of industry mergers, deals, and investment were things like cost and patent cliffs, said E. Eric Tokat, Partner at Centerview Partners LLC. But this year, it’s science. 

Gene therapy, right? Selling gene therapy is the next wave, said Geoff Meyerson, CEO and Co-Founder of Locust Walk. But if you actually look at deals, there’s still "an awful lot of small molecule deals getting done and an awful lot of small molecule therapies getting approved by the FDA," he said. “There’s still a lot of value in the traditional types of assets.” 

But there are challenges ahead: Finding a standardized, efficient way of producing clinical and commercial scale of breakthrough treatments, safety, AI, big data, and ensuring payors know the drugs work—just to name a few. 

What they’re saying: “We’re on the first or second inning of scientific revolution. We will continue to see dealmaking,” said Tokat—but the uncertainty, specifically with the election and looming drug pricing legislation, could derail it.

 
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How can companies secure investment in this environment? Pay attention to the science and the data and have a clear focus, investors agreed. As Tokat put it. “If you help patients, it will all fall into place.”

The bottom line: “We will look back on this year and say it was a great year for biotechs,” concluded Tokat. But short-sighted policies could derail this tremendous progress, and an Elizabeth Warren or Bernie Sanders nomination would complicate things even further, creating a “very different biotech valuation environment.”

Read more on what investors had to say at #BIOCEO20.

 
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The Washington outlook

“Is an election-year compromise on anything possible?” asked BIO Chair Jeremy Levin in the opening session.

The state of play: During a session focused on the election and policy environment, BIO CEO Jim Greenwood explained the House-passed H.R. 3 centered on an international price index, or IPI, is “DOA” in the Senate and the bipartisan Grassley-Wyden bill in the Senate is “an opportunity to get a deal,” though any deal is “a long shot.”

The date to watch: May 22, 2020, the deadline to renew funding for health care extenders, which could be a vehicle for policymakers to address drug pricing or out-of-pocket costs. 

If nothing happens by the spring, it’s unlikely to happen this year. 

Will Trump move forward with IPI? It’s possible, though Sarah Butler Donovan, Head of Client Solutions, Marketing & Ops for Avalere Health, said it’s “probably a positive sign for the industry” it wasn’t specifically mentioned in the State of the Union. Still, there’s concern the administration and Speaker Nancy Pelosi, who led H.R. 3, may try to make a deal to get an index through.

Can this happen in an election year? Probably not, because Pelosi doesn’t want to give Trump the win, and Trump wants to accomplish too much—but we have to remain vigilant about the possibility of an international price index while also continuing to push for policy that will address out-of-pocket costs in a meaningful way.

Jim’s Judgment: “What people are angry about is not the price of drugs, but what they pay...The primary fact on the ground that needs to be changed is patient out-of-pocket cost—and let’s start with Part D.” 

Read more about whether this can happen and what that might look like.
Read the recap of Levin's opening session.

 
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What about China?

Between the trade war, the Committee on Foreign Investment in the United States (CFIUS), and coronavirus, China M&A has been a bit rocky. Here's what to expect.

The situation: Kimberly Nearing, Venture Partner of BVCF Management Ltd and a member of the Board of BayHelix, said cross-border M&As are “flat but active” and partnering is up 30% despite the uncertainty, showing there’s interest on both sides in maintaining investment and business flowing between the two countries.

The trade war “is a self-inflicted wound we imposed on ourselves,” she said. “Our biotech companies were benefitting greatly from the influx of capital from China for a number of years,” but this has gone down dramatically.

And capital has decreased, but Geoff Meyerson said we’re nonetheless still seeing deals.

Keep an eye on this: “China is still a wild card,” said Carol Lynch, President of Sandoz US and Head of North America, Sandoz, speaking during a fireside chat. China is looking at regulations across the board, as well as opportunities to harmonize regulations and get closer to US/EU regulations, “but how that lands will be interesting to watch."

And the coronavirus? Several investors said they were worried about the virus, with Tokat stating he worries we might be underestimating the severity. And that many people on lockdown is not something to brush off, he said. 

Nearing was more optimistic: “This too will pass,” she said.

Here's what else they had to say.

 
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The bottom line: patients first

Across the board, speakers agreed: principles matter, and you have to put patients first. And a meaningful out-of-pocket fix can achieve that.

“I believe in the social contract,” said Jeremy Levin.

“Be part of the solution,” he implored companies. “It’s great to have a medicine, but you’ve got to get it to them, and it’s got to be safe, effective, and affordable.” 

It’s important for policymakers to have the same goal: “I would like Congress to focus on patients,” said BIO Vice Chair Paul Hastings, CEO of Nkarta Therapeutics. 

When it comes to prescription drug policy, there are two “moral principles” to keep in mind, said Greenwood. First, no one should ever do without the medicine they need because they cannot afford the out-of-pocket cost. Second, no policy should ever be acceptable to an elected official if it drives money away from innovation in biotech.

Jim's Judgment: “If you follow those two principles—and you can—we can take care of patients, we can take care of payors, we can take care of costs, and we can have innovation.”

Let’s hope someone’s listening.

 
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President Trump’s Tuesday: Not much on the public agenda, but it's the New Hampshire primary today.

What’s Happening on Capitol Hill: The House and Senate are in session, but expect New Hampshire to dominate the news.

 
 
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