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Hello again from San Francisco! One thing was clear during the annual JPMorgan Healthcare Conference last week: The biotech and pharmaceutical industries are more optimistic about 2024 after a tumultuous last year.
That conference gathered thousands of industry executives, investors and analysts, many of whom seemed hopeful for a positive year ahead after a rocky 2023 marked by a drop in the number and value of biotech investments, aggressive cost-cutting across hundreds of companies and increased scrutiny from the federal government around drug pricing and deals.
Don't get me wrong – some of those headwinds will remain. Medicare will attempt to negotiate down the prices of ten costly drugs this year, a policy under the Inflation Reduction Act that aims to cut costs for consumers but that many drugmakers say will hurt profits and stifle innovation in the industry.
But companies had a number of other reasons for optimism about 2024.
The conference followed a broader rebound in M&A activity in the biotech and pharmaceutical industries in 2023, especially during the last few days of the year. A handful of deals, including Johnson & Johnson's $2 billion acquisition of cancer developer Ambrx Pharma, were also announced during the conference.
Industry experts expect dealmaking to continue and even accelerate in 2024, especially since many large pharmaceutical companies are facing revenue challenges such as upcoming losses of exclusivity of some blockbuster drugs.
Pharmaceutical companies stand to lose more than $350 billion in revenue over the next four years due to patent expirations, but they also have $1.37 trillion on hand to spend on deals, according to Arda Ural, EY's Americas industry markets leader in health sciences and wellness.
"We feel increasingly positive about 2024 outlook for the industry based on the mad dash deal activity in the end of the year, which spilled into the first two weeks of 2024," Ural told CNBC after the conference.
That healthy M&A activity, along with the Federal Reserve's signal that it could cut interest rates, has some hoping that investments in biotech companies will recover this year.
At the same time of the conference, data and analytics firm GlobalData released a survey showing that more than 40% of healthcare industry professionals surveyed globally expressed an "optimistic" or "very optimistic" sentiment that biotech funding will start to bounce back over the next 12 months.
But the firm noted that North America had the highest share of respondents with a pessimistic sentiment, likely due to "uncertainty on when the IPO market is to return."
Industry experts are also optimistic about innovation following a breakthrough year for certain drugs in 2023.
Last year, the Food and Drug Administration approved 55 new drugs, a notable jump from just 37 in 2022. The agency also greenlit a handful of cell and gene therapies, including the country's first gene-editing treatment, Casgevy, for use in patients with sickle cell disease.
At an event held at the same time of the conference, the Alliance for Regenerative Medicine, an international advocacy organization for cell and gene medicines, forecasted up to 17 approvals for those treatments in the U.S. and EU in 2024.
"We're optimistic that we'll see a lot of these pulled through to the finish line," Tim Hunt, CEO of the organization, said during the event.
Feel free to send any tips, suggestions, story ideas and data to me at annikakim.constantino@gmail.com.
