Expect bold moves in the biopharma industry in 2013

By John Carroll and Ryan McBride

At FierceBiotech, we'll be getting 2013 off to a quick start in January with live coverage from the JP Morgan Healthcare conference. We've already made plans to raise our game a few notches with more breaking news coverage, in-depth features and exclusives for our global audience.

So about the easiest prediction we've got for 2013 is that we'll be quite busy. (We'll be updating our websites with news next week, but look for the next edition of FierceBiotech in your inbox on Jan. 2). The dynamic biopharma industry keeps us on our toes, providing plenty of interesting developments to report, and we've made 5 predictions about how we think things will play out.

Biotech gets back to dreaming

Don't be fooled by the overflow of news on stock swings and megabucks involved in biotech; many people--and I would guess most--become enamored with this industry because of the promise of transforming scientific discoveries into new therapies.

Bank on 2013 being a year when real innovators in life sciences with bold ideas look like smart businesspeople, too.

It turns out that economies demand innovation from biotech. Healthcare payers have shown over and over again that incremental improvements or marginal benefits from new drugs won't be rewarded. And we see companies like Moderna Therapeutics gaining investments with bold plans to revolutionize biotech.

You really never know whether companies like Moderna--which is using a messenger RNA platform to spur the body to produce its own therapeutic proteins--will ultimately succeed. Yet we see investors such as Flagship betting their futures on truly transformative technologies.

This is what has made companies like Biogen ($BIIB) and Genentech great.

The money problem continues

Don't let the spate of recent venture rounds in the lead-up to Christmas fool you. The biotech industry has a money problem, and it's not going to disappear in 2013.

For four years after the financial crisis in 2008, biotech didn't do so badly on the venture front. Certainly there was no wild party in the venture suite, but the money flowed steadily enough to support startups and fuel clinical stage development--until the first half of this year.

After a weak start, the second quarter saw only $697 million in 90 deals, a 42% plunge compared to the same period the year before. The numbers picked up considerably in the third quarter, but not enough to replace the hundreds of millions that evaporated earlier in the year. The Russians have helped, providing Rusnano with hundreds of millions of dollars to sink into biotech companies. But new players can't fill the void.

In an innovative industry like biotech, the absence of venture backing is a big deal. And without a new crop of drug developers to take the place of the companies that are being bought out or fail, there will be fewer deals to do in the future. And that means fewer promising drugs for Big Pharma to take up the pipeline.

Like every other industry, biotech is cyclical. But lean times get tiresome. They also threaten to do some lasting damage to the complex ecosystem that supports a diverse group of players.

Open R&D comes of age in 2013

When GlaxoSmithKline ($GSK) made its big announcement earlier this year that it will open up its data to qualified investigators, you could feel the industry flinch. Now look for some others to follow suit in a fashion that will make this trend all but unavoidable.

Big Pharma R&D has been hiding behind its elaborate Chinese walls for decades. If they were churning out a bunch of big new drugs every year, that could continue. But the whole system broke down, and not just because it became clear that too many big players liked to hide some discomforting information that patients and physicians needed to know about. The old way of developing drugs doesn't work anymore, and in fashioning a new approach in a more open ecosystem, the walls will come tumbling down.

It's not easy. First, the data has to be standardized so that investigators know how to work with it. TransCelerate can go a long way to managing the first halting steps in this direction. There will be holdouts, to be sure, but they're not asking for much initially.

Once another Big Pharma company takes the data pledge, the rest of the boards are likely to find the pressure to open up unbearable. Managing the process will then become the focus rather than trying to avoid the inevitable.

Keep in mind, though, that there are limits to what you can do in the open. No one is going to simply hand over valuable IP to rivals. On the other hand, there's never been a better time to take the pledge. Too many players have had to cover too many huge settlements for past misbehavior. Changing the industry's reputation will require concrete actions. Simple promises to do better next time won't cut it.

Eli Lilly will make major strategic changes

Eli Lilly ($LLY) CEO John Lechleiter knew that 2012 would not be a great one for his company, with the loss of patent exclusivity on Zyprexa hammering the Indianapolis-based drug giant's bottom line. Yet Lilly failed to deliver a Phase III winner with solanezumab, among other late-stage setbacks.

In 2013, expect the chief executive to pull the trigger on some major deals to give investors faith in the future of the company.

Lechleiter has made it clear that he's not interested in megamergers, and this stance probably won't change because the industry has figured out the economic hitches of such deals. However, the company will need to aggressively pursue the type of bolt-on acquisitions that have been the toast of pharma chiefs around the world.

Lilly has a fairly robust pipeline of diabetes drugs, with promising candidates such as dulaglutide and an ongoing alliance with Boehringer Ingelheim. But the company has shown weakness in one of the core areas of its business and pipeline, the central nervous system (CNS). If ever, solanezumab won't be a factor for Lilly for years. And it ditched a Phase III effort for pomaglumetad methionil in schizophrenia.

Look for Lechleiter to show that Lilly can be a future leader in the CNS arena with a significant deal. What choice does he have, really?

Hep C race reaches finish line

In pursuit of cures for a serious liver disease, biopharma outfits cranked out one huge news event after another this year from their hepatitis C programs. The major drivers have been the snowballing problem of hep C in the aging population and the success of all-oral therapies that could wipe out the virus relatively quickly without need of interferon.

In 2012, Gilead Sciences ($GILD) led the race for such therapies with cocktails built around its candidate sofosbuvir, which it picked up in the monster buyout of Pharmasset ($VRUS) for $11 billion. Next year we'll see Gilead build its lead in this race, which includes rivals such as Abbott/AbbVie, Bristol-Myers Squibb ($BMY) and a pack of other wily developers.

Gilead aims to seek FDA approval of sofosbuvir next year, and the Foster City, CA-based drugmaker is in position to become the first company with an all-oral regimen against hep C on the market. Timing is hugely important in this race, because millions of patients in the U.S. and abroad are expected to jump at the chance to get rapid cures once all-oral regimens become available.

Yet hep C comes in multiple variants, with distributions of each varying from country to country. Bristol-Myers understands this as well as anyone, and the New York-based drug giant aims to be the first to market with an all-oral combo in Japan. In fact, expect many companies to seize opportunities to develop and commercialize new hep C therapies in geographies other than the U.S.

This is a potential $20 billion market, and companies will seek many different paths to grab their share of it.

-- John Carroll (email | Twitter) | Ryan McBride (email | Twitter)

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