The Sunday Supplement: What's Moving Markets & Shaping The BioPharma Industry

Week of 8/21

In the realm of healthcare and biopharma, the week of August 21st brought forth significant developments that could reshape the landscape. Novo Nordisk's Wegovy emerged as a noteworthy player, demonstrating its prowess beyond weight loss by showcasing substantial cardiovascular benefits in their Phase III STEP HFpEF trial. Meanwhile, researchers-turned-audiophiles conducted a brain-mapping study by reconstructing Pink Floyd's iconic "Another Brick In The Wall, Part 1"  from brainwaves, marking a pivotal stride towards understanding music perception and its implications for assistive technologies. Also, new research on brain-computer interfaces revealed groundbreaking potential in reconstructing speech for impaired individuals.

Mergers and acquisitions in the healthcare sector presented a complex picture, with biopharma poised to seize opportunities driven by shifting valuations, impending patent cliffs, and a muted IPO market. Late-stage assets appeared to be the prime target for acquisition, aligning with strategies to overcome forthcoming patent losses and leverage lower valuations. However, regulatory scrutiny remained a shadow in this dynamic landscape.

The infusion of $200 million into AI-driven drug discovery startup Genesis Therapeutics underscored the increasing significance of artificial intelligence in biopharma. As a pivotal player in a competitive market, Andreessen Horowitz's big bet on the biotech highlights the demand for a AI-backed drug discovery platform. Let the race begin!

Research, Development, & Drug Approvals

Novo Nordisk's Wegovy Proves Game-Changing in Heart Health

Facts: Novo Nordisk's GLP-1 receptor agonist Wegovy (semaglutide) has demonstrated significant cardiovascular benefits in the recent Phase III STEP HFpEF trial, adding to its established efficacy in weight loss. The trial specifically targeted adults with heart failure with preserved ejection fraction (HFpEF) and obesity, showcasing "large" reductions in heart failure symptoms, physical limitations, and notable improvements in exercise function. Employing the Kansas City Cardiomyopathy Questionnaire Clinical Summary Score (KCCQ-CSS) as a co-primary endpoint, the study revealed a significant 16.6-point increase in patients treated with semaglutide at 52 weeks, as compared to an 8.7-point increase in the placebo group, with a p-value of p<0.001. This comes on the heels of another trial indicating the drug's cardiovascular benefits, setting the stage for its label expansion into the treatment of cardiovascular diseases. [Link]

Opinion: Wegovy's splash on the market appears to be a promising treatment option for obese individuals, not only for weight loss, but also for certain cardiovascular benefits. Now if only doctor's would prescribe an active lifestyle...

Berkeley Researchers Reconstruct Pink Floyd Song from Brain Waves

Fact: In a groundbreaking achievement, a team led by neuroscientist Ludovic Bellier at the University of California, Berkeley, successfully reconstructed Pink Floyd's iconic 1979 song "Another Brick In The Wall, Part 1" from the brain activity of 29 patients undergoing awake neurosurgery for epilepsy. The data, collected between 2008 and 2015, was decoded using artificial intelligence to understand the neural representation of music elements. The study, published in PLOS Biology, unveiled that electrodes capturing sound onset and rhythm were crucial in constructing the song, revealing the significance of these elements in music perception. This milestone not only advances our understanding of how the brain processes music but also holds promise for improving voice prosthetics, speech technologies, and aiding those with hearing impairments through future brain-computer interfaces and microcortical stimulation. [Link]

Opinion: This research's potential to decode brain activity related to music perception and reconstruct audio is a remarkable advancement that holds promise for various applications. The technology could impact a range of medical conditions and fields, particularly those related to auditory perception, brain-computer interfaces, and assistive technologies. While not a direct treatment, a device with the capacity to decode neural activity patterns could find applications in addressing hearing impairments, aiding speech rehabilitation for those with neurological conditions, facilitating brain-computer interfaces for motor-impaired individuals, and even enhancing cognitive functions in "normal" people. Translating this potential into practical therapeutic applications will require more comprehensive research, clinical validation, interdisciplinary collaboration, and careful consideration of ethical and user-related aspects.

AI-Equipped BCIs Restore Communication for ALS Patients

Fact: Two groundbreaking studies recently published in the journal Nature have revealed significant advancements in brain-computer interface (BCI) technology that could revolutionize communication for individuals with speech-limiting conditions such as paralysis and amyotrophic lateral sclerosis (ALS). Spearheaded by teams from the University of California San Francisco and Stanford Medicine, the studies demonstrated different but effective methods for translating brain signals into words. The UCSF team's approach involved recreating the full experience of speech, incorporating facial expressions and jaw movements, while Stanford's system translated thoughts into text displayed on a screen. Despite being in the proof-of-concept stage, these technologies have already enabled participants in the studies to communicate in new ways, with Stanford's system achieving a translation rate approaching that of natural spoken English conversations. Both teams aim to refine and commercialize their technologies, promising significant advancements in restoring communication abilities for individuals with speech-limiting conditions. [Link]

Opinion: The brain-computer interfaces (BCIs) developed by UCSF and Stanford represent significant commercial potential in addressing the unmet needs of patients with speech-impairing conditions like ALS and paralysis. These BCIs could revolutionize patient-provider and patient-family interactions through either a digital avatar that can talk and make facial expressions or a screen that displays translated words. Revenue models could include direct hardware sales, software licenses, service contracts, and strategic partnerships with established medical device manufacturers or pharmaceutical firms. However, the route to commercialization involves overcoming key hurdles: FDA regulatory approvals, a comprehensive insurance reimbursement strategy, and ongoing technical improvements to minimize error rates. If these challenges are successfully navigated, these BCI technologies could not only significantly enhance the quality of life for patients but also catalyze the growth of a new market segment within the medical device industry.

Politics & Policy

Will Strive's Lawsuits Encumber Vivke's Presidential Campaign?

Facts: Vivek Ramaswamy, a former biotech CEO and current Republican presidential candidate, is facing legal challenges with Strive Asset Management, an anti-ESG asset management company he co-founded. Two former employees have filed lawsuits in Kansas and New Jersey, alleging various improprieties. The first suit accuses Ramaswamy of misrepresenting the company's financial stability to lure an executive away from JPMorgan Chase, while the second claims that Ramaswamy and another executive pressured the plaintiff into using non-compliant sales material and violating securities laws. These lawsuits come as Ramaswamy is running for the Republican presidential nomination and raise questions about his management and ethical practices. Both cases are pending in court, with Strive Asset Management vowing to "vigorously defend itself." [Link]

Opinion: Certainly not a good look for Mr. Ramaswamy, who dominated the Republican presidential debate stage on a platform of America-first, pro-capitalist, meritocracy. If it turns out that Strive was just some window-dressing for his political ambitions, the fallout could damage his growing credibility as the anti-establishment's Lord and Savior.

Eli Lilly's Top Executive Invests in Mike Pence's Political Aspirations

Facts: David Ricks, CEO of pharmaceutical giant Eli Lilly, has made a substantial early donation of $25,000 to a super PAC supporting former Vice President Mike Pence's potential 2024 presidential run. The donation is among the top 30 contributions to the political action committee, "Committed to America." Pence and Eli Lilly have strong ties to Indiana, and Ricks has expressed optimism about the former Vice President's understanding of the pharmaceutical industry's challenges and opportunities. The donation is notable given that Ricks has been relatively reserved in making presidential campaign contributions in the past, though he has supported other political campaigns, such as that of Sen. Tim Scott (R-S.C.). [Link]

Opinion: Backing a presidential candidate as a Big Pharma CEO presents a complex landscape of risks and rewards. While it offers a chance to influence policy and align with a candidate who may support favorable regulations, it also risks alienating stakeholders due to political polarization and inviting increased regulatory scrutiny. In the case of Eli Lilly, their CEO's support for Pence could potentially impact the company's market perception and shareholder relations, especially given the contentious issue of drug pricing. Given the current volatile political climate and the industry-specific risks, particularly around drug pricing, such high-profile political backing could be more of a liability than an asset for Lilly.

Intellia Moves Clincial Trials Abroad Amid FDA's CRISPR Caution"

Facts: Intellia Therapeutics has decided to conduct its mid-stage clinical trial for a CRISPR-based treatment for hereditary angioedema (HAE) entirely outside the United States after the FDA called for additional research on reproductive safety for women of child-bearing age. This move reflects a growing trend where biotech companies like Intellia and Verve Therapeutics are opting for less stringent regulatory environments overseas due to FDA's cautious approach to the fast-evolving field of gene editing. The FDA’s hesitance has implications for the timeline of gene therapy development in the U.S., which may see delays in patient access to potentially transformative treatments. Intellia aims to re-enter the U.S. market in Phase III after complying with FDA requirements. [Link]

Opinion: While the FDA's cautious approach is understandable given the potential risks associated with gene editing, its conservative stance could slow down innovation and patient access to novel therapies in the U.S. The FDA must attempt balance this caution with enabling innovation, especially for treatments of rare and severe diseases where existing solutions are inadequate. The risk here is that a cautious approach may deter companies from conducting early- and mid-stage trials in the U.S., potentially impeding the nation's leadership in the biotech space and driving pharma overseas (and they may not return...).

VCs, M&A, and IPOs

Troubled Biopharma M&A Is Poised to Shine in Challenging Market

Facts: Amidst a decline in M&A activity within the healthcare sector this year, the biopharma industry is projected to experience a surge in mergers and acquisitions in the coming months. Expert analysis suggests that the confluence of factors—such as a looming patent cliff affecting major drugs, a 30% decrease in biotech companies' valuations from October 2021 to January 2023, and a sluggish IPO market with only nine biotech IPOs by the end of July—is driving this anticipated uptick. Biopharma companies are strategically acquiring late-stage assets from the biotech sector, with M&A lawyer Matt Gardella predicting a year-end value of around $180 billion in biopharma M&A deals, compared to $127 billion in 2022 and $108 billion in 2021. Large pharmaceutical firms are drawn to biotech acquisitions due to these companies' decreased valuations, making them attractive for strategic partnerships. Furthermore, the less robust IPO market pushes late-stage biotech companies towards acquisition as a means of ensuring continued operations. Despite the favorable outlook, potential antitrust scrutiny remains a concern for the biopharma M&A landscape, indicating a dynamic and multifaceted environment. [Link]

Opinion: The decision for Big Pharma to initiate acquisitions now or wait hinges on a complex interplay of factors. Acquiring biotech companies with late-stage assets can help offset impending patent expirations and leverage attractive valuations. This strategic move could fortify pipelines, enhance competitiveness, and offer value to shareholders. However, potential antitrust scrutiny, market volatility, alignment with long-term goals, and integration challenges highlight the need for a careful and strategic approach. Balancing these considerations is crucial for making timely and informed decisions that align with the broader growth strategy and maximize long-term value.

a16z-backed Biotech Receives $200M to Reimagine AI-Drug Discovery

Facts: Genesis Therapeutics, a Burlingame-based startup specializing in AI-driven drug discovery, has secured $200 million in Series B financing. The round was co-led by Andreessen Horowitz (a16z) Bio + Health and an undisclosed life science investor. This places the startup among a handful of well-capitalized AI-based biotech companies, including Atomwise and Exscientia. Genesis is built on two core studies carried out by its Stanford founders, with an emphasis on both generative and predictive AI technologies. The first technology, called PotentialNet, optimizes the binding of small molecules to protein targets using neural networks. The second claims to use deep learning to predict ADMETox (Absorption, Distribution, Metabolism, Elimination, Toxicity) of drug candidates with remarkable accuracy. The company's total funding now stands at $280 million. [Link]

Opinion: Genesis Therapeutics' technological promise for optimizing drug-target interactions is blaringly evident, however the soundness of Andreesen's investment decision is less so. Several risks could make this a precarious bet for the venture capital firm. The application of deep learning in drug discovery remains largely experimental, without a proven commercial track record. This barren market has stoked an arms race as biotechs compete for compute, thickly layering the competitive landscape with AI-driven biotechs all vying for the same innovation space. Regulatory challenges in moving from computer-generated drugs to clinical trials cannot be understated and have historically been a major barrier for market entry. On the flip side, Vijay Pande, the founding general partner at a16z Bio + Health, has been quoted saying, "This AI revolution is going to come to chemistry," highlighting the firm’s belief in the transformative power of AI in the life sciences. The high-risk nature of Genesis Therapeutics' work also resonates with a16z's venture strategy, which historically embraces the 'go big or go home' mantra. Given that drug discovery is a capital- and time-intensive process with uncertain outcomes, the investment represents both a gamble and a strategic alignment for Andreessen Horowitz. It’s a high-stakes move consistent with the VC firm’s appetite for disruptive potential, but laden with specific industry risks that they must navigate carefully.