Thumbs Up/Down

2017 gets started with a bang as we get a glimpse of the good, the bad and the ugly

Endpoints assesses the big biopharma R&D stories of the week, with a little added commentary on what they mean for the industry.

thumb Pre-JPM biotech news burst underscores a strong start to 2017, for the private side

Brad Loncar noted on Twitter earlier today that there’s been a dearth of public biotech news ahead of the big JP Morgan confab next week. But the private side has been anything but quiet. Case in point: George Scangos quick pivot from CEO at Biogen to chief of a startup called Vir Biotechnology. Arch has already committed $150 million in backing, and Gates and others will add hundreds of millions more. The news, alongside a blast of new developments that dominated this short work week, underscores that the funding side in biotech remains active, even as public biotechs continue to face a difficult and unforgiving market. We count that as a glass more than half full, which is a good way to start the year.

thumb down M&A valuations are shooting sky high. How long can that last?

We start 2017, like 2016, with some big expectations on the M&A side of things. After a woeful year in new drug approvals, Big Pharma — as well as Big Biotech — is in bigger need of new deals than ever. But buyouts have lagged far behind expectations. And a new analysis of valuations helps explain why. The cost of new biotech acquisitions has been steep, and it’s growing at a rapid pace. With fewer attractive late-stage assets, it’s a seller’s market, and they know it. Premiums are bursting far beyond old expectations. And it’s begging a simple question: How long can that kind of trend last? Big Pharma’s R&D model is already busted and exposed to huge pressure if pricing reforms take shape. A reckoning won’t be painless.

thumb down A painful downturn in new drug OKs exposes a serious weakness

Don’t let soothing projections of higher new drug approvals for this year persuade you to overlook just how serious 2016’s anemic record is for the industry. Too many Big Pharmas are already suffering from a shortage of new product OKs. And too many approvals that do arrive are for drugs that are poised to enter brutal competitions. A simple return to the approval rates we grew accustomed to in 2013-2015 isn’t going to fix that fundamental problem. And Big Pharma accounts for a huge share of the overall R&D dollar in biopharma. Something has to give here, which may encourage new models of drug development that will force a focus on late-stage pipelines above all else. Too much money is wasted on R&D, and waste is getting incredibly unfashionable. Any big player that figures out a sustainable model for new product development will be quickly copied.

thumb Academics are breaking the mold in early-stage R&D

I’ll admit right off the bat that I have a keen interest in biotech startups that like to break the mold. And PvP Biologics, a spinout from the University of Washington, accomplished that nicely this week, going from startup to Takeda partner with $35 million in R&D support to back a proof-of-concept study for a new treatment for celiac disease. No VC cash. No huge dilution. But lots of expert advice. The move underscores a small but growing trend as academics do more than accept a sliver of equity for their preclinical work. This is a company, and a trend, well worth watching.

thumb Big Pharma execs are making a bee-line to biotech

As chance would have it, I had the opportunity to talk to Neon Therapeutics CEO Hugh O’Dowd earlier in the week about a big new round. The Novartis vet had just exchanged emails with David Epstein, the former pharma chief for Novartis who joined Flagship as an executive partner this week. And that news came right on the heels that Novartis oncology development head Alessandro Riva had jumped ship for Gilead, which needs all the help it can get to execute a turnaround on a suffering pipeline. Novartis has been pushing a major overhaul over the past year, and a string of top execs has been fanning out into the biotech world. That’s another indication of the more vibrant fortunes available in biotech these days, as well as a vote for where innovation will lie in the years ahead.

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Research Scientist - Immunology
Recursion Pharmaceuticals Salt Lake City, UT
Director of Operations
Atlas Venture Cambridge, MA

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