INN offers a closer look at the path ahead for biotech investors in 2020 as new challenges arise for the industry.
Click here to read the latest biotech outlook.
The new year has a collection of challenges in store for the biotech sector and its investors, as pressure mounts from Washington on drug pricing practices.
Along with talking points surrounding the upcoming presidential election in the US, several drug approvals and research developments will be key for biotech investors throughout 2020.
With that in mind, the Investing News Network (INN) is offering a preview of what companies and experts in the space are looking forward to this coming year for the biotech market.
Biotech outlook 2020: Volatility ahead for industry
A report from research firm Vantage indicates that 2020 will be a rocky year for investors given challenges around drug pricing and public opinion on the matter.
“The unpredictability of stock markets and other macro-economic issues mean it is hard to predict how the financial health of the sector might change,” the wide-ranging report states. “Events from outside the sector can quickly shift sentiment towards the high-risk drug development industry.”
Speaking to INN, Pratik Pangaonkar, senior editorial analyst with GlobalData (LSE:DATA), said he’s noticed that a lot of analysts in the space don’t expect to see a big shift in legislation surrounding pricing.
The expectation from experts, Pangaonkar said, is for tensions surrounding drug pricing to intensify right up until the federal election period picks up in the US.
As it currently stands, Washington has picked up on chatter about implementing an international pricing index in order to control the cost of these products.
“The basic idea is to peg what the US pays for a particular drug to the price paid in some set of other countries,” Rachel Sachs, an associate professor of law at Washington University in St. Louis who specializes in drug pricing policy, told NPR following the release of a reform plan from House Speaker Nancy Pelosi this past September.
Pangaonkar said the sentiment among analysts indicates that US President Donald Trump will most likely move forward with this strategy, as he has been a vocal critic of drug pricing schemes in the US.
LaToya Lee, quality and regulatory services leader at Clarkston Consulting, said the US Congress is impacted by public opinion, and with smarter patients the conversation around drug pricing will continue in 2020.
“You’re seeing a lot more hearings and a lot more congressional leaders getting involved in drug pricing, and I think the elections are only going to impact that more, because the candidates are going to use that as a stomping tool to reach potential voters,” Lee told INN.
Biotech outlook 2020: NASH activity could spark M&A
Samuel McLeod, senior editorial analyst at GlobalData, told INN that in the new year he will be closely monitoring the development of Ocaliva from Intercept Pharmaceuticals (NASDAQ:ICPT). Ocaliva is a treatment for bile acid buildup from primary biliary cholangitis.
The sector has taken a particular interest in the potential approval of Ocaliva for the treatment of non-alcoholic steatohepatitis (NASH).
“Data from other competition from the NASH space is also expected in 2020, so it could be a very important year materializing into what has been dubbed a potential US$25 billion indication. It will be interesting to see, if Ocaliva is approved, how uptake of the drug goes in 2020, and that will be a good indicator of the rest of the drugs coming to market later on,” McLeod said.
The analyst also offered his perspective on the possibility of NASH sparking merger and acquisition activity. He pointed to companies like Viking Therapeutics (NASDAQ:VKTX), Galmed Pharmaceuticals (NASDAQ:GLMD) and Madrigal Pharmaceuticals (NASDAQ:MDGL) as ones to monitor.
Biotech outlook 2020: Oncology a growth opportunity
According to Vantage’s report, both sales and funds are being attributed and directed by the oncology sector, meaning drugs or treatments against cancer.
A projection from the report indicates that four oncology drugs will be part of eight total new drugs expected to provide US$1 billion in 2020.
The biggest money-maker drugs in the oncology sector are from the usual suspects: massive biopharma companies. Names such as Merck & Co. (NYSE:MRK), Gilead Sciences (NASDAQ:GILD) and Celgene, which is owned by Bristol-Myers Squibb (NYSE:BMY), are expected to rake in profits associated with high-priced oncology treatments.
Biotech outlook 2020: Investor takeaway
Investors are poised to face a challenging 2020, with potential key product approvals expected to help push forward developments in the biotech space.
“I think people are really seeking information and trying to make themselves healthier, and it’s causing a positive effect on putting pressure on the companies that support the medicinal industry,” Lee said.
With that shift in patients, talk in the political world will deeply affect sentiment surrounding investment and development in the biotech arena.
“New legislation is thought most likely to emerge after November 2020. And while investors are for now downplaying the chances of near term material changes to reimbursement and rebate structures, concerns could easily escalate again,” the report from Vantage indicates.
Alongside the possibility of approvals in the US, analysts will be monitoring just how Washington intends to oversee the prices of these items for patients.
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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.