What to watch in the life sciences in 2024

It’s the season of predictions and projections. Here are a few trends in life sciences and healthcare our analysts are keeping an eye on – and what they expect to see in 2024:

  • Move over, oncology – metabolic drugs are the new hotness: The successful launches of Novo Nordisk’s Wegovy® and Eli Lilly’s Mounjaro® represent a revolutionary pharmacological breakthrough of rare proportions. Obesity accounted for an estimated $170 billion in excess healthcare costs in the U.S. alone in 2019, and it’s a growing global health threat. The scale of unmet need, coupled with clinical evidence of strong cardiovascular benefits for these treatments, suggests that this category could soon become pharma’s biggest sector – and that these pioneers won’t have it to themselves for long as other companies seek to grab a share.

That’s not to say that biopharma’s streak of innovation in oncology is over – far from it, as antibody drug conjugates (ADCs) and bispecific antibodies come online, enabling highly targeted delivery of chemotherapy and other payloads, is beginning to bear fruit. No wonder, then, that ADCs featured so prominently in recent deal-making, notably with Pfizer’s $43 billion acquisition of Seagen, AbbVie’s $10 billion acquisition of ImmunoGen and Merck/MSD’s $4 billion co-development deal with Daiichi Sankyo.

  • A long winter for biotech financing: Capital scarcity is likely to continue as prospective investors and partners remain cautious, due to high interest rates and concerns around externalities such as government initiatives to contain healthcare costs and global geopolitical conflicts. It’s been a hardscrabble 12 months for biotechs seeking financing — the NASDAQ biotech index is down 7.3% year-over-year – even as the NASDAQ composite index is up 29% for the same period.

Capital droughts are cyclical, and despite the gravity-defying strength of the U.S. economy, the global economy remains fragile, with high interest rates, wars and other factors making investors skittish. Moreover, governments are flexing new regulatory muscle on market access. The Biden Administration implementing its Inflation Reduction Act and threatening to use “march-in rights” to bring drug prices down by seizing patents, while pharmas are sweating the European Commission’s forthcoming legislation.

As a result, investors are more cautious to fund biotechs. VC financing, debt financing and follow-on financing remain tepid, and appetite for IPOs has fallen off a cliff.

One implication of this is that biotechs are going to have to get craftier in making their pitch for pharma partnerships. Pharmas are increasingly coming to the negotiating table with questions that go beyond matters clinical and into the commercial realm – what’s your regulatory strategy? What does good market access look like for your products? Back in the days when biotechs could content themselves with selling off assets at phase 2, they didn’t need answers on addressable markets and regulatory hurdles. Those days are past, for the foreseeable future.

The good news is that pharmas need biotech partners more than ever – many large pharma portfolios are dominated by molecules acquired through external sources, and with steep patent cliffs upon them, these companies urgently need to replenish their pipelines, in particular through acquisitions of platform technologies like ADCs and gene editing. They just won’t be quite as easy a sell for biotech as in the past.

  • AI and machine learning become boring: Since the debut of ChatGPT last spring, the corporate world has been evaluating how these technologies could impact their business, or if they were more than a passing fad. So what’s next?

Well, don’t expect any “Big Bang” moment. Rather, we’re going to begin to see these technologies become pervasive and mundane, an essential enabling tool – in the life sciences and every other sector. Drugs discovered using AI and machine learning are already in clinical trials, and the use of AI/ML for other functions, including diagnostics and imaging, clinical trial design and launch strategies, will soon be the new standard. We’ll see continued evolution of regulations around the use of AI/ML as well, and companies will need to stay on top of this fast-changing regulatory landscape.

For further insight into the new drugs and trends set to define 2024, don’t miss our upcoming Drugs to Watch report, debuting January 8th.