With 2018 coming to an end, what’s the biotech outlook? Next year will bring new investing opportunities for those in the space.
The year is coming to an end, but 2019 looks set to bring new investing opportunities to the table for the biotech market.
In our 2018 biotech trends article, the Investing News Network (INN) reviewed some of the biggest news in the space throughout the year, including developments related to immuno-oncology, biosimilars and drug approvals from the US Food and Drug Administration (FDA).
Below we look at what investors should look forward to in 2019, with insight from industry experts. Some key areas that insiders believe will make an impact are merger and acquisition (M&A) activity, new drug areas and clinical trial news.
Biotech outlook 2019: Low prices mean M&A opportunities
Biotech companies have seen their share prices come under pressure lately, David Nierengarten, managing director at Wedbush Pac Grow Healthcare, told INN. He believes this could mean it’s a good time for companies to engage in M&A activity — perhaps at appealing prices.
Jack Curran, senior industry analyst with IBISWorld, agreed with that sentiment. He said M&A activity is being used as a backlash against companies’ lower profit margins.
Gaining power via acquisitions can lead to more negotiating power, and can later have a big effect on the market altogether. Smaller companies that hold important patents could be acquired by the larger companies to gain an “edge in this competitive market,” Curran explained.
Bayer’s (OTC Pink:BAYRY,ETR:BAYN) 2018 acquisition of Monsanto was “one of the most significant things to happen in the biotech industry in the past five years,” he added.
Biotech outlook 2019: Bigger focus on other drug categories
Biosimilars, autoimmune diseases, neurological disorders and gene therapies are just a few biotech drug categories that may take off in 2019, and there are different reasons that each might see success.
For example, the FDA said in 2018 that biosimilars should be readily available in 2019 for a variety of reasons. William Looney, executive editor for In Vivo at Informa Pharma Intelligence, told INN the “adoption of more biosimilars [is] a cost-effective strategy.”
This could reduce drug prices for specialty biologics in the US, and “impact the loss of exclusivity for more biologics in advancing the reliance on biosimilars in Europe.”
Looney added that progress for new drug developments may come in areas with high unmet medical needs. Alzheimer’s is leading, with cardiomyopathy, microbiome, NASH and rare cancers following.
Bonnie Bain, global head and executive vice president of healthcare operations and strategy at GlobalData (LSE:DATA), and Kelly Lambrinos, senior editorial analyst at GlobalData, also said there could be a bigger drug focus on gene therapies.
“The gene therapy hype is in full swing after the FDA approved Spark Therapeutics’ (NASDAQ:ONCE) Luxturna to treat children and adult patients with an inherited form of vision loss,” they told INN. “Developments in gene therapy will be a mainstay.”
A factor leading to this potential new trend is the FDA’s new draft guidances, issued in July. The organization unveiled a complementary framework aimed at advancing gene therapies, GlobalData said.
From the six new draft guidances from the FDA, three have been gene therapy-related products, they said. Key areas for the guidances have been hemophilia, retinal disorders and rare diseases.
This proves the agency’s commitment and “willingness to support” the development of these drugs, they said. They believe this support “will increase the potential of expedited development for gene therapy candidates in these spaces.”
Some companies GlobalData said to look out for in regards to these gene therapy advancements include: BioMarin Pharmaceutical (NASDAQ:BMRN), uniQure (NASDAQ:QURE), Solid Biosciences (NASDAQ:SLDB), Audentes Therapeutics (NASDAQ:BOLD), Ultragenyx Pharmaceutical (NASDAQ:RARE) and Nightstar Therapeutics (NASDAQ:NITE).
Biotech outlook 2019: Clinical trial news
Clinical trial news and milestones are among the priorities for companies, analysts and investors alike in the biotech space. Clinical-stage companies are directly affected by this news, for better or worse, because they rely heavily on having a successful pipeline.
GlobalData’s Bain and Lambrinos said to look out for Krystal Biotech’s (NASDAQ:KRYS) Phase 3 trial initiation in the second half of 2019. The drug candidate, KB103, is a first-in-class topical gene therapy in development for recessive dystrophic epidermolysis bullosa.
Pavan Cheruvu, CEO of Axovant, told INN the company is expecting initial data in the first half of 2019 from a study it initiated in Q4 2018 for advanced Parkinson’s disease patients. The drug, AXO-Lenti-PD, is a new gene therapy program licensed from Oxford BioMedica in June. Other data from the trial is expected throughout the year.
The company also plans to initiate a study for oculopharyngeal muscular dystrophy using AXO-AAV-OPMD in the second half of 2019.
BriaCell Therapeutics (TSXV:BCT) is expecting data on its combination study of Bria-IMT and immune checkpoint inhibitors with Merck’s (NYSE:MRK) Keytruda. The company is also developing a personalized off-the-shelf immunotherapy cell line, the Bria-OTS, which is expected to enter the clinic in late 2019.
Oragenics (NYSE:OGEN) CEO Alan Joslyn said his company is ready for a better year in 2019. The company intends to complete its fast-track clinical trial in oral mucositis and “generate positive clinical results in 2019,” he said. This could significantly increase the value of Oragenics.
Joslyn added that depending on his company’s financial status, it may file an FDA investigational new drug (IND) application for its lead novel antibiotic OG716 to treat clostridium difficile infection.
INN also spoke with Zymeworks (NYSE:ZYME,TSX:ZYME) CEO Ali Tehrani about what investors can look forward to for the company. Tehrani said the company’s near-term goal is advancing its internal pipeline while staying active on the deal front.
Tehrani said the company will present data from “multiple ongoing studies of ZW25” at major medical meetings in 2019. “We expect more of our partners to advance their Azymetric-enabled bispecific compounds into the clinic in 2019,” he said. Zymeworks received a milestone payment from Eli Lilly (NYSE:LLY) when it submitted its IND in September.
Biotech outlook 2019: Investor takeaway
In addition to clinical trial news, Nierengarten said the FDA has been more creative on what studies are acceptable to register new drugs, which has been positive. He added that investors should watch Argenx (NASDAQ:ARGX) and Clementia Pharmaceuticals (NASDAQ:CMTA).
The FDA allowed Clementia to seek approval based on the information it already had, although Nierengarten believes this hasn’t been entirely reflected in its share price yet. “People have overlooked that opportunity for whatever reason and that could be a surprising performer next year,” he said.
Nearly all CEOs INN spoke with recommend that investors have patience — and a strategy — when investing in biotech companies.
“Biotech has the potential to make a tremendous difference,” Tehrani said. “But drug development is both an art and a science that requires experience, time and investment.”
He recommended that investors look for companies run by management teams that have strong track records with developing drugs. They should also “not [be] reliant on one product or technology.”
Joslyn added there is often a big disconnect between a company’s market cap and the value of its assets, which has occurred with his company.
Overall, investors are left with an abundance of milestones to look forward to in the developing biotech industry. For what happened in 2018, investors can read our biotech trends article.
Don’t forget to follow @INN_LifeScience for real-time updates!
Securities Disclosure: I, Gabrielle Lakusta, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: BriaCell Technologies is a client of the Investing News Network. This article is not paid-for content.
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.