BDO's Top 4 Predictions for the Life Sciences Industry in the Year Ahead

February 2018

Download Infographic [PDF]

What’s in store for the life sciences industry in 2018? BDO’s life sciences partners predict M&A deal activity will bounce back after a relatively slow 2017, more venture capital funding will flow into biotech companies, costly therapies for rare diseases will be priced on a milestone-based basis, and Chinese biotech companies will seek regulatory expertise to pursue U.S. and E.U. commercial markets. 

1.VC FUNDING IN THE BIOTECH SPACE WILL REMAIN IN LINE WITH 2017’S RECORD-BREAKING LEVELS.
Venture capital firms committed almost $16 billion to the biotech space in 2017, 31 percent more than in 2016. BDO’s life sciences partners believe that venture capitalists will continue to invest similar amounts this year as cash-rich investors seek to fund companies before they go public or are acquired by large pharma conglomerates.

2. BIOTECH M&A WILL BOUNCE BACK AFTER A RELATIVELY SLOW 2017. 
There were 101 deals in the biotech industry in 2017, down from 130 in 2016. But this year should see deal activity soar as large pharma companies, helped by the reduced corporate tax rate and more favorable tax treatment for repatriating capital, seek to acquire targets with strong development pipelines of innovative therapies and devices. The main driver of deal activity is the need to replenish development pipelines as pharma companies face the loss of patent protections on their drugs.

The bounce-back is already in the works. In January alone, Sanofi paid $11.6 billion for Bioverativ, Celgene agreed to acquire Impact Biomedicine for about $7 billion and Juno Therapeutics for $9 billion, NovoNordisk offered to acquire Ablynx for more than $3 billion and Takeda Pharmaceuticals made a $630 million offer for TiGenix.

“We only get rewarded if we actually create a lot of value for our investors by creating a lot of value in the healthcare system.” – Bert Notini, New Mountain Capital

3. EXTREMELY EXPENSIVE THERAPIES WILL BE MEASURED AND PRICED ON A PATIENT MILESTONE- BASIS, WITH REIMBURSEMENTS BASED ON THE YEARS OF LIFE THE PATIENT GAINS.
Some therapies for rare diseases or diseases that are difficult to treat are anticipated to cost more than $1 million. To make them more accessible to patients, new approaches such as “years of life” milestone-based reimbursements are being considered. In the case of Novartis and its gene therapy Kymriah (leukemia treatment), it’s charging for the drug only if patients go into remission within one month of treatment.

“The days of having an indication, and it covering everyone whether it works or not, [are] going away. You see it occurring in oncology. Oncology's often a leader, but you have metrics there. Has there been tumor shrinkage? Has there been extension of life? It'll work well in disease therapies where the treatments are very measurable as to their success.” - Ann Kraft, Purdue Pharma

4.CHINESE BIOTECH COMPANIES WILL SEEK U.S. AND EUROPEAN REGULATORY EXPERTS IN-HOUSE.
As China-based biotech companies seek to unlock the potential of the U.S. and European markets, they will increasingly rely on US-based expertise and guidance to meet standards for safe and efficacious products.  

“To sell products outside of China, there may be a higher regulatory bar and greater scrutiny by regulators. As China moves beyond manufacturers of API and generics to developing new products, they will need to meet FDA [and EMA] regulations to obtain licensure and market their products to these geographies” – Susan Linna, Managing Director, BDO Life Sciences Specialty Services
 

CONTACT
 
Eric Sobota
Life Sciences and National Industry Specialty Services Practice Leader

Todd Berry
Assurance Partner and Leader of BDO’s Life Sciences practice

Susan Linna
Managing Director in BDO’s Life Sciences Specialty Services practice