Outlook

The global corona pandemic continues to keep the world on tenterhooks. With the first approved vaccines, such as the mRNA vaccines, the biotech industry has emerged as a player. The challenge now is to overcome manufacturing capacity and logistical challenges to ensure widespread introduction of the vaccines. Only then it will be possible to boost population immunity to SARS-CoV-2 and its variants. In addition, new technologies, such as gene editing, are likely to come into focus in 2021. Thanks to increased technological advances and growing capital flows, the biotech sector's momentum will continue to accelerate. In terms of policy, the newly elected US government's main goal is to enable more citizens to access the healthcare system. A well-organized healthcare ecosystem makes innovation affordable for patients in need. BB Biotech assumes that the existing price structure can be maintained.

The COVID-19 pandemic continues to challenge global healthcare infrastructures as well as societies and economies. Under intense pressure and with a substantial upside opportunity, the drug development industry moved quickly to identify technologies and compounds with potential to be used prophylactic or therapeutic against the virus. Unprecedented efforts and collaboration in 2020 between scientists, the drug development industry and regulatory authorities has led to the development of multiple effective and safe prophylactic vaccines. Following approvals with the mRNA vaccines in the lead, the focus now has turned towards manufacturing capacities and logistical challenges to allow broad vaccine roll-out and adoption leading to an increase in population immunity. The national differences in investing and gaining access to vaccine capacity has so far led to highly dispersed vaccination rates in different countries, allowing the virus to spread in unprotected areas of the world, and more worrisome the surfacing and spread of novel virus strains. To win this race, an effective global vaccination strategy is required, additional novel prophylactic vaccines to help increase capacity and continued efforts to convince the population to participate. The new strains such as the UK, the Brazilian or the South African strain already prove that not all the vaccines can maintain their high protection levels to all variants in circulation. The leading vaccine players such as Moderna have already outlined their plans to adapt the vaccine’s make-up to specifically improve the protection levels for these resistance strains, being it through a booster strategy such as a third injection or by developing novel versions of the vaccine as a booster that encode for the respective variant. The challenge to quickly adapt to a changing situation proves that the messenger RNA technology and platform is ideally suited to respond faster than historic vaccine technologies and platforms.

«Unprecedented efforts and collaboration in 2020 between scientists, the drug development industry and regulatory authorities has led to the development of multiple effective and safe prophylactic vaccines»

The key questions that we are currently engaged with are 1) whether the dynamic between natural immunity, vaccine-induced immunity and viral resistance will necessitate a continuous update of vaccine valency similar to what is common procedure in the seasonal flu protocols and 2) if so how often a boost will be required, 3) in which subpopulations and 4) over what timeframe. The scenario of seasonal influenza with its characteristic traversal between northern and southern hemispheres may be the only but in fact poor proxy as a long-term model if one considers the relatively low average vaccine efficacy (30-50% in most years) and the substantially higher mutation rate in comparison to SARS-CoV-2 owing to the former’s lack of genetic repair mechanisms.

We are surprised by the emergence of a strain partially resistant to vaccines at such an early timepoint, though it likely is a mutational pressure reaction to the broader natural immunity acquired by some populations such as in South Africa. It seems very difficult to assess the variety of possible conformational spaces the spike protein could occupy through mutational variation, avoiding prior antibodies induced through natural infection or vaccination while retaining the ability to efficiently bind to the human ACE2 receptor.

Number of FDA drug approvals

Overall, the pandemic situation continues to be a substantial strain on the healthcare system, with many areas of healthcare continued being underserved and financially constrained. The consequences of that will become more evident in the coming years such as the implications due to late diagnosis and a lack of initiation of important medical therapies. During the pandemic FDA and other regulatory bodies around the world have worked quite efficiently and we saw more than 50 new drug approvals in the US in 2020. We are expecting to see a significant number of approvals in 2021 with several of those coming from BB Biotech´s portfolio companies. For regulators and the drug development industry the learning curve has been steep during the pandemic and we hope that some of these learnings can be leveraged to in the future.

New technologies are expected to prove their disruptive potential

Progress for the newest drug modalities will be a focal point for biotech investors in 2021 and beyond. With important and highly promising results presented in 2020, further proof for technologies such as gene editing, next generation gene therapy and cell therapy technologies are expected. Exemplary of such success is the gene editing treatment CTX001 by Crispr Therapeutics and Vertex to treat sickle cell and beta thalassemia patients. A one-time treatment, still a rather invasive procedure requiring transplantation so far has resulted in de facto functional cures in all treated patients. Increasing knowledge driving efficacy and maintaining a clean long term safety data will allow that the gene editing companies to move from rare and severe diseases towards broader and large chronic diseases. To achieve this, further technological advancements are required to improve ease of use and administration routes, lower manufacturing costs and growing safety database.

BB Biotech’s investments in new technologies

A similar trajectory, substantially further than the gene editing technology can be observed for the RNA-based and RNA-targeting drug modalities. With first drugs approved years ago, the improved next generation chemistry and improved delivery options allow to go through these expansion steps, following what has been achieved with recombinant proteins and antibody therapeutics in the last two decades.

Development speed – adaption of our S-curved investment strategy

Deeper understanding of the genotypic and phenotypic differences between cells in normal and diseased states, substantially improved computational approaches in drug screening, identification and selection all the way to smarter and adaptive clinical trial programs are contributing to an acceleration of the innovation cycle. The most obvious examples can be found in genetically defined rare diseases and targeted oncology with development timelines from the lab to the patient in record time, often achieved in two to three years. The acceleration of the development cycle is appealing for investors, allowing smaller companies to raise and deploy capital efficiently and in many cases aspire to develop and commercialize first in class or best in class therapies all on their own. This again results in improved return on invested capital for investors to attract capital and re-invest into the next generation of companies.

Important milestones will support the positive industry momentum

The momentum of the biotech industry will remain strong, even accelerate due to the increased technological advancements, growing capital flow supporting innovation from the venture investors to public investors, all the way through an increasing number of clinical development projects leading up to a growing number of product approvals. Product approvals have grown from the 20’s per year in the early 2000s, increasing to 30-40 products approved per year in the last decade to 50-ish in recent years. Even though the pandemic impacted the industry and regulatory authorities, 53 approvals were awarded in 2020, excluding emergency use authorizations such as those for SARS-CoV-2 vaccines. 2021 shall be no exception to this trend, with regulatory authorities continuing their COVID response but supporting innovative technology progress and clinical projects and by reviewing important registration filings. A substantial investor focus will be on the regulatory decisions for aducanumab for the treatment of Alzheimer disease that could set precedents and shape future interactions between the drug development industry and regulatory authorities.

We expect important progress for many clinical development projects such as targeting oncogenes and oncogenic mutations and a host of immune oncology programs is inching towards major readouts that will impact future enthusiasm and investment behavior from both industry and investors in this area. For central nervous system disorders, substantial progress is ongoing for many of the genetically driven diseases such as Huntington disease (HD) or amyotrophic lateral sclerosis (ALS). In cardiovascular disease, novel lipid and triglyceride lowering agents are advancing in late-stage clinical trials and in cardiovascular outcomes trials. Another important area that is experiencing renewed investments is in the regenerative medicine field driven by an increasing tool box to modify cells accordingly, such as with the Crispr/Cas9 gene editing approach.

Politics and healthcare reform – US administration expanding access to the healthcare system

The newly elected US administration has outlined its healthcare plans, with core priorities being to maintain and even broaden access to healthcare insurances. This includes a push for the individual mandate, to limit the costs of such healthcare insurance all the way to lowering prescription drug prices by changing laws currently banning Medicare from negotiating lower drug prices with manufacturers. A clear positive for the science driven and innovative biotechnology industry is the role of a newly appointed presidential science advisor Eric Lander, a decorated geneticist who was a key figure in the Human Genome Project – the race to sequence the human genome.

A well-managed healthcare ecosystem will make innovation affordable for patients in need. Access to the newest and often more expensive treatment options require an insurance model. We expect that orphan drugs and targeted oncology drugs will maintain their price premium and that the general model for high volume drugs at lower price points allows to maintain this price model. In this context and with the global pandemic leading historical record levels of volume and demand for the prophylactic vaccines, we agree with industry that the price range from USD single digit to high 30’s offer tremendous value for societies.

30 years biotechnology – shift to a sustainable growth industry