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Home , Biopharmaceutical, SVB Leerink, United Therapeutics

feature The anomaly Investment and funding has continued to fow into biotech, unlike most business sectors. But with healthcare and hospital budgets increasingly under pressure, do belt-tightening and consolidation lie ahead? Melanie Senior investigates, with additional reporting by Riku Lähteenmäki.

he biopharmaceutical industry largely has been spared from the public Tmarket rout that has gutted most economic sectors since COVID-19 hit. After an initial, indiscriminate shock to stock prices in March 2020, investment in biotech companies listed on the stock exchanges has actually increased. The Nasdaq Index emerged from the slump to reach a five-year high — up 11% since the start of the year, following a 20% rise in 2019. Biotech initial public offering (IPOs) have also picked up; in June, the over two dozen 2020 listings had together raised nearly $8 billion — more than over the same period in 2019. In early June, CAR-T maker Legend Biotech raised $424 million in the largest ever Nasdaq listing by a Chinese biotech. “The capital markets remain open and active,” to the surprise of many, says Geoffrey Porges, senior Ruslan Grechka / Alamy Stock Photo. analyst at SVB Leerink. The non- discretionary nature of healthcare — and the sector’s key role in finding solutions to Follow-on public financing has also was the first COVID-19 therapy to receive the pandemic — have also attracted a flood been healthy, topping $19 billion so far this US Food and Administration (FDA) of generalist and retail investors as they flee year, including almost $2 billion raised by Emergency Use Authorization. Regeneron’s struggling sectors like retail, restaurants and RNA-focused Moderna in two separate 60% share-price gain since the start of the airlines. Private biotech financing also had share offerings in February and May 2020 — year comes thanks to a monoclonal a record first quarter. The pandemic, which the earlier one at $19 per share, the (mAb) duo due to enter the clinic in June has been poison to most sectors of industry, later at four times that. Moderna is the and drug Kevzara has brought funds to biopharmaceutical breakout ‘COVID-19 performer’ so far: (sarilumab), a human IgG1 mAb targeting enterprises from an even wider spread of its shares have trebled since the end of the -6 receptor, being investigated investors than normal. 2019 on the back of heated excitement as a therapy for patients with severe around its RNA-based candidate COVID-19 disease. Infectious-disease- and Crisis? What crisis? against the novel coronavirus (SARS-CoV-2), immunology-focused Vir Biotechnology For some biotech companies, listing now slated to start phase 3 trials in July. has also nearly trebled in value since — in the midst of what economists call (Press-released interim data on eight January, to $4 billion, after announcing the worst recession in living memory — is patients from a small study led by the US COVID-19-related collaborations on easier than in late 2019, when the China– National Institute of Allergy and Infectious antibody with GlaxoSmithKline US trade war caused market jitters. ADC Diseases claimed that the candidate, and Alnylam Pharmaceuticals, itself up 20% Therapeutics, for instance, pulled an IPO in mRNA-1273, generated an antibody since the start of the year. October 2019 and raised an oversubscribed response similar to that seen in By mid-May 2020, there were over a $235 million in early May 2020 (Table 1). convalescing patients.) hundred treatments and more than a dozen Others are seizing the advantage to raise Valued at over $23 billion, loss-making vaccine candidates in human testing across money, even if they don’t really need to: Moderna is just one of a growing list of the wider biopharmaceuticals industry, therapy venture Generation Bio raised biotechs who have mobilized resources to find academic institutions and non-profits. $230 million in a June IPO, after raising a vaccine or therapeutic for COVID-19 — This extraordinary effort is in part enabled $110 million in private money just four and seen their shares rise as a result. Also by the healthy financing environment for months earlier. Its assets are still preclinical. riding the COVID-19 wave: , biotech during 2019 (and much of the So are those of -based whose failed hepatitis C (HCV) previous decade). Last year saw large boosts group Akouos, which recently filed for small-molecule candidate , an to industry revenue, even higher rises in a $100-million IPO, having raised $105 injectable nucleoside analog that inhibits R&D spending, and chart-topping up-front million in a series B in March. viral RNA-dependent RNA polymerase, partnership financing.

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Table 1 | Top ten IPOs of 2019 Company (lead underwriters) Amount raised Date Listing Phase of ($ millions) completed location development Genmab (BofA Merrill Lynch, ) 582 17 July NASDAQa Market 10X Genomics (J.P. Morgan, , BofA Merrill Lynch, Cowen) 449 12 September NASDAQ Market BridgeBio Pharma (J.P. Morgan, Goldman Sachs, Jefferies, SVB Leerink, Piper Jaffray, 401 26 June NASDAQ Phase 3 BMO Capital Markets, Raymond James) Adaptive (Goldman Sachs, J.P. Morgan, BofA Merrill Lynch, Cowen, 345 26 June NASDAQ Market Guggenheim Securities, William Blair, BTIG CStone Pharmaceuticals (Goldman Sachs, Morgan Stanley, UBS, China Merchants 328 25 February HKEX Phase 3 Securities Gossamer Bio (BofA Merrill Lynch, SVB Leerink) 317 7 February NASDAQ Phase 2 Cellid (Morgan Stanley, Citic CLSA) 277 20 February KOSDAQ Phase 1/2 Alphamab (Morgan Stanley, Citic CLSA) 234 12 December HKEX Phase 3 IGM Biosciences (Piper Jaffray) 201 12 December Preclinical Turning Point Therapeutics (Goldman Sachs, SVB Leerink, , Canaccord 191 18 April NASDAQ Phase 1/2 Genuity)

aGenMab listed in 2000 on the Danish exchange. HKEX, Hong Kong Exchanges; KOSDAQ, Korea Exchange. Source: BCIQ BioCentury Online Intelligence

The COVID-19 effort has generated Box 1 | The numbers its own flurry of deals — including, most recently, Merck’s May 2020 acquisition of private Austrian biotech Themis, with Nature Biotechnology has published a the unique attributes and situations its measles virus vector-based vaccine report on public biotech companies that make up the research-driven technology. The pandemic has not curbed using a similar methodology since 1996. biotech sector. big biotech or big pharma’s broader pipeline Our defnition of what constitutes a Te data were provided by consultants hunger, either. Non-COVID-19-related biotech company has changed with Ernst & Young. Te top-ten lists and deal-making has slowed, but not stopped. the industry, as have our methods other aggregate lists are sourced It is mostly restricted to partners with for gathering the information that appropriately, although mostly they an existing relationship. (Carrying out powers this article. We generally are generated by an analysis of data first-time meetings and due diligence over include R&D-driven companies built supplied by BioCentury. In this regard, video conferencing is tricky.) Prices are on applications of biological organisms, because investors do not stratify the holding up, at least for popular assets. systems or processes, or the provision biotech sector as stringently as Nature In late May, Gilead bought a $200-million of specialist services that facilitate Biotechnology, we used money fgures from equity stake in Hayward, California-based biological understanding. We exclude across the biotech and biopharmaceutical Arcus Biosciences, at a price nearly triple pharmaceutical companies, medical arena to best highlight trends. Companies the company’s valuation during most of device frms and contract research delisted in 2019 from major exchanges 2019. The deal mirrored Gilead’s noteworthy organizations to better focus on were excluded. 2019 collaboration with Galapagos of Mechelen, Belgium — in structure, if not size. A further $175 million up front sealed Gilead’s access to a palette of cancer drug candidates, led by a humanized 2014 IgG1 mAb targeting TIGIT (T-cell 8.54 10.74 9.04 21.49 3.27 36.99 immunoreceptor with immunoglobulin 2015 and ITIM [immunoreceptor tyrosine‐based 7.49 28.69 13.99 50.27 2.88 58.46 IPO inhibitory motif] domains) in phase 2 2016 Follow-on 6.91 9.97 12.52 44.82 2.76 62.96 trials for non-small-cell lung cancer, in Venture ear various combinations with the anti-PD1 Y 2017 Debt and other (programmed cell death receptor 1) fully 5.50 22.32 15.53 21.35 6.09 58.68 PIPEs human IgG4 mAb zimberelimab and AB928, 2018 Partnerships 10.96 25.58 23.40 17.61 3.58 77.82 a small-molecule adenosine A2a/A2b 2019 . (On March 2, before the 10.61 22.54 21.50 13.80 2.47 72.88 pandemic roiled markets, Gilead forked out 020406080 100 120 140 160 180 $4.9 billion, also at a healthy premium, for Amount raised ($ billions) five-year-old immune-oncology firm Forty Seven and its humanized IgG4κ anti-CD47 Fig. 1 | Global biotech financing. Financing over the past six years. Source: BCIQ BioCentury Online mAb antibody magrolimab, in phase 2 trials Intelligence.

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for myelodysplastic syndrome and acute 4,500 myelogenous leukemia.) NBI The sector’s public prominence amid the S&P 500 pandemic may also have reduced the threat of immediate curbs on US drug pricing, 4,000 according to many analysts — a threat that cast a shadow over the industry during 2018 and 2019. President Trump is looking to 3,500

the sector to help him navigate out of the x lockdown, restart the economy and win another election: hardly the time to clobber Inde 3,000 it with unfriendly new rules, such as an international reference price index.

Clouds may be looming 2,500 It’s unclear whether the good times will last. “It’s quite understandable that companies are raising capital now, while markets remain 2,000 strong,” says Joshua Schimmer, senior 9 9 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0

1/2/19 1/1/20 managing director of biotech at . 1/30/1 2/27/1 3/27/1 4/24/1 5/22/1 6/19/1 7/17/1 8/14/1 9/11/1 10/9/1 11/6/1 12/4/1 1/29/2 2/26/2 3/25/2 4/22/2 5/20/2 “We may still see a lot of volatility,” he says — Date though acknowledging that, if the sector continues to weather the crisis as well as Fig. 2 | Nasdaq Biotechnology Index over time. As of 6/1/2020. NBI, Nasdaq Biotechnology Index; S&P, it has been, “it’s hard to imagine what else Standard & Poor’s 500 Index. could derail it.” Until now, trillions of dollars of government support have cushioned the full impact of lockdown on employment Box 2 | Heady IPOs in 2019 and household budgets (including, in the United States, the affordability of health Danish antibody company Genmab’s of the region’s home-grown innovative insurance) and created a sharp disconnect second coming (it listed in 2000 on the biotech sector, spurred on by the Hong between stock markets and the underlying Danish stock exchange) topped the overall Kong stock exchange’s recent acceptance economy. If and when that support dries IPO ranks. It raised $582 million in July, of pre-revenue companies and the up and markets collapse, all but the boosted by a mature portfolio including ongoing US–China trade war, which has best-capitalized companies could suffer. three approved (partnered) and driven Chinese money back home. Te Negative news from the COVID-19 pipeline 20 clinical development programs Hong Kong IPO scene was bookended will also take the heat off healthcare stocks (Table 1). Te year marked Nasdaq’s by two cancer-focused biotechs: CStone and some firms’ ability to raise capital. emergence as the defnitive market of Pharmaceuticals, which raised $328 A second lockdown before a drug or vaccine choice for European biotechs, ofering million in February, and Alphamab is found will mean further trial delays access to more capital, more specialist Oncology, which drew in $234 million in across non-COVID-19 R&D, stretching the investors and greater liquidity than local December. resilience of biotech companies and their European exchanges. All but one of the 2019’s top ten IPO cohort was investors even more. top eight European-company IPOs were a relatively young one: six were Slowing markets will disproportionately in the United States. German cancer founded within the last decade; three affect smaller and pre-revenue companies, immunotherapy and vaccine company (BridgeBio, Gossamer Bio and CStone including those whose clinical trials have BioNtech raised $148 million in October; Pharmaceuticals) were just four years old. ground to a halt during the pandemic its upward share trajectory received a Te year’s mostly buoyant IPO market also lockdown. The biotech industry has raised COVID-19 boost in 2020 as the company continued to draw in non-traditional over $140 billion in debt over the last five advanced a handful of RNA-based funders, including crossover investors years — including a further $10.9 billion so COVID-19 vaccine candidates into (which can invest in both private and far in 2020. Some of this debt is plain vanilla trials. BridgeBio Pharma raked in public companies), private equity investors loans to large, cash-generative biotechs like over $400 million in 2019’s third-largest (normally focused on revenue-generating . But ‘convertible’ loans — which can Nasdaq IPO, with its enticing suite of frms) and sovereign wealth funds. be converted into equity at a later date, such clinical-stage precision tackling Deep-pocketed frms like Blackstone, as at a subsequent financing round — have rare genetic diseases and genetically KKR, RA Capital and Bain Capital put also become more popular over the past defned cancers. money behind pre-IPO candidates, helping several years among smaller, pre-revenue Tree of 2019’s top ten IPOs were bounce them onto public markets and companies, in part because they delay the in Asia. Tis marks the continuing rise draw in more public funds. tricky business of valuing such groups. In early March 2020, BridgeBio Pharma raised a higher-than-anticipated $475 million in convertible notes; Gossamer Bio raised $200 In good times, borrowing is easy, and it equity offering). But in tougher times, some million’s worth in May, alongside a smaller allows companies to avoid diluting the value companies may be unable to service or repay equity offering. of their shares (which is what happens in an their debt, leading to bankruptcy — or a fire

800 Nature Biotechnology | VOL 38 | July 2020 | 798–811 | www.nature.com/naturebiotechnology feature sale. Convertible loans, whose terms may Table 2 | Top ten follow-on financings of 2019 vary from months to several years, may also need to be repaid in full if a company Company Amount raised ($ millions Date fails to meet fundraising targets; lenders Sage Therapeutics 575 02/27/2019 get priority over shareholders in the case of insolvency. Ascendis Pharma 575 03/05/2019 There are already signs of trouble. Seattle Genetics 575 07/23/2019 Companies relying on revenues from a Reata Pharmaceuticals 505 11/13/2019 narrow portfolio of hospital drugs have had Amarin 460 07/18/2019 to cut costs or sell out at bargain prices. In May 2020, Portola Pharmaceuticals, Deciphera Pharmaceuticals 460 08/14/2019 which sells Andexxa (recombinant human Alnylam Pharmaceuticals 388 01/14/2019 coagulation factor Xa inactivated-zhzo) Sarepta Therapeutics 375 03/05/2019 for excessive bleeding, was picked up by Blueprint Medicines 345 03/28/2019 Alexion Pharmaceuticals for $1.4 billion, or $18 per share — well below Portola’s Pharmaceutical 340 02/26/2019 pre-COVID-19 share price of close to $30. Source: BCIQ BioCentury Online Intelligence Sage Therapeutics — whose $575-million follow-on financings topped the league in 2018 and 2019 — in early April announced cuts to head count and costs, facing Table 3 | Top ten revenue-producing biotechs of 2019 dwindling sales of its hospital-administered Company 2019 revenue ($ millions) % change from 2018 postpartum depression Zulresso (brexanolone) and an idle sales force. Amgen 23,362 –2% On the IPO markets, Pitchbook Gilead Sciences 22,449 1% reports a flurry of listings by ‘shell’ Biogen 14,378 7% companies (also known as special-purpose Regeneron Pharmaceuticals 7,863 17% acquisition companies), set up to buy promising yet cash-hungry targets. Alexion Pharmaceuticals 4,991 21% Tübingen, Germany-based T-cell cancer 4,163 37% immunotherapy-focused Immatics Illumina 3,543 6% Biotechnologies in March 2020 bioMérieux 3,002 8% reverse-merged into Nasdaq-listed Arya Sciences Acquisition, raising $252 million. Incyte 2,159 15% COVID-19’s full impact on the sector Novozymes 2,159 –2% has yet to play out. A funding squeeze may Source: Ernst and Young lead to better capital efficiency — a skill some companies lost amid the funding bonanza of the last few years. Industry’s rapid, collaborative response to the virus and cell-based therapies and drugs for rare partnership monies topped $14 billion, outbreak, along with some promises, diseases — hot spots in the years up to and beating 2018, largely thanks to Gilead’s such as from AstraZeneca, to provide including 2019 — may rapidly be viewed $3.95-billion payment to partner Galapagos. any eventual vaccine at cost, may help as less affordable as population health The Nasdaq Biotechnology Index also restore the reputation of a sector criticized measures are prioritized, and if economists’ performed a lot better than in 2018. Much of for price-gouging, hiding bad data and predictions of a deep, dark recession bear the 20% overall rise came in the last quarter neglecting diseases of the developing world. out. “I worry that much of the money of 2019, more than making up for 2018’s 9% Yet the drug pricing debate, if pushed flowing into the sector today isn’t going into decline (Fig. 2). down the road, hasn’t gone away. The sector’s the right places,” says the fund manager. The $10.6-billion total IPO haul — only value to society has never been clearer, but a fraction below the previous year’s — was what society can afford to pay for that value A look back at 2019 dominated, as usual, by listings in the is far less so, particularly as economies 2019 can seem either a long time ago or just United States. But Asia’s share of IPO money reopen amid mass unemployment and yesterday, thanks to the distorting effect increased from 32% to 42%, filling the hole heavily indebted governments. “It’s a delicate of a global pandemic. Yet public biotech left by a dwindling number of European time for the industry,” says one analyst. companies’ resilience so far is due, in part, to listings. Targeted cancer immunotherapy Longer term, this pandemic should 2019’s healthy financials, increased revenues and rare genetic diseases remained mean more public funding for the and robust investment in research and devel­ white-hot (Table 1 and Box 2). sciences, driving emboldened private opment (Box 1 and Supplementary Table 1). Follow-on financing in 2019 totaled $22.5 investors to follow. “Investment into pharma Capital continued to flow strongly into billion — a slight fall from 2018, but still and healthcare will continue to increase,” the biotech sector in 2019, even if the figures including four late-stage companies that predicts one UK-based fund manager. didn’t quite reach the heady heights achieved each raised over half a billion (Table 2). Two The focus of this investment may change, in 2018. Total public biopharma fundraising of those, cancer-focused antibody–drug though. Governments are now much more was over $122 billion, with IPO and conjugate (ADC) company Seattle Genetics likely to prioritize , anti-infectives follow-on offerings bringing in about $33 and depression-focused Sage Therapeutics, and preventative care. High-priced gene billion of that (Fig. 1). Up-front (committed) were also in 2018’s top ten. Three dozen

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Box 3 | Vertex wins chase for revenues

Amgen clung onto number one in the molecules bictegravir (HIV integrase cystic fbrosis transmembrane conductance revenue league, cashing in over $23 billion — inhibitor), emtricitabine (nucleoside analog regulator (CFTR) gene. Vertex bumped up 1% below its 2018 haul (Table 3). inhibitor of HIV reverse transcriptase) and its R&D spending by 24%. A legal victory against Sandoz in August tenofovir alafenamide (nucleotide analog Biogen’s 10% drop in market 2019 pushed competition to inhibitor of HIV reverse transcriptase) — capitalization over the year hid a very number-one earner Enbrel () plus near doubling of sales of its CAR- bumpy ride. High-profle Alzheimer’s years down the road; Enbrel price increases therapy Yescarta (albeit from a low base) disease candidate aducanumab, a fully and volume growth across other products allowed the big biotech to blunt the impact human anti-amyloid-β IgG1 mAb, failed enabled the biotech to neutralize the impact of competition to its HCV franchise. Tat futility analyses in two phase 3 trials in of price erosion and competition elsewhere HCV expertise keeps on giving, though: March, wiping a quarter of Biogen’s value. across its aging portfolio, including to Gilead’s value has risen by >12% since the But October brought a surprise resurrection Neulasta (pegflgrastim; recombinant end of 2019, to $92 billion, thanks to its attempt, when Biogen announced it would methionyl human G-CSF (flgrastim) failed HCV drug candidate remdesivir. On submit the drug to FDA afer all, based on conjugated to monomethoxypolyethylene May 1, the adenosine analog became the a new analysis of the data that included glycol). Management declared the start of a frst COVID-19 therapy to receive FDA longer-term data from some patients. new era of product-driven growth; fttingly, Emergency Use Authorization. Submission has since been delayed, but R&D spending grew 10%. Te company Vertex’s 33% value uptick over 2019 — this ray of hope, plus ex-US growth for also expanded its geographic reach, worth $14 billion in market capitalization — spinal muscular atrophy drug Spinraza paying $2.7 billion for a minority stake in tracked a similarly sized revenue increase. (nusinersen), helped nudge Biogen revenues China’s BeiGene, which will commercialize Both were driven by uptake of its most to $14.3 billion, slightly higher than the Amgen’s existing cancer drugs in China and recent cystic fbrosis medicine combination previous year. R&D spending fell 13%. co-develop new ones. Symdeko (also called Symkevi; small Biogen generates three times Vertex’s Gilead’s $22.4 billion in 2019 revenues molecules tezacafor/ivacafor and revenue, but Vertex is valued more highly, were almost unchanged, signaling a ivacafor) and early US approval and given its growth prospects. COVID-19 recovery from 2018’s declines. A growing launch of Trikafa (elexacafor/tezacafor/ has widened that gap: Vertex’s market HIV portfolio, driven by Biktarvy triple ivacafor and ivacafor), targeted at patients capitalization has since soared beyond $73 therapy — a combination of small with at least one F508del mutation in the billion, while Biogen’s has fallen.

a b

450 Number of companies 140,000 120,000 Large 400 Number of employees 383 101,240 Mid 116,597 120,000 100,000 Small 350 Number of emplo Micro 100,000 80,000 300

250 73,758 80,000 60,000 184 200 60,000 40,000 30,398 y 150 ees 21,550 23,788 107 40,430 40,000 14,730 Amount ($ millions) 20,000 Number of companies 8,695 100 9,044 3,245 6,215 23,222 20,000 50 32 0

0 0 –9,142 –20,000 –10,038 Large Mid Small Micro –12,238 Revenue R&D Profit/loss

Fig. 3 | Public biotech barometers. a, Number of companies and employees by market capitalization. b, Public biotech revenue, R&D spending, and net profit and loss. Large cap, ≥$5 billion; mid-cap, $1 billion to <$5 billion; small cap, $250 million to <$1 billion; micro-cap, <$250 million. others banked over $200 million each to fuel benefited from profligate private investment partnership revenue) accounted for almost their pipelines; gene-therapy venture Sarepta and average IPO sizes above $100 million. two-thirds of the total. Therapeutics and Agios Pharmaceuticals, Total industry revenues were up 11% to The increase in revenues coincided with focused on cancer and rare genetic diseases, $135 billion, with Amgen, Gilead and increased industry R&D spending — an featured in that category both years. Biogen accounting for 44% of that (Table 3, increase even more substantial than that Box 3 and Supplementary Table 1). But the over the previous year. A total of $60.1 Higher revenues spawn R&D splurge biggest revenue rises were among mid- and billion in R&D spending represented an For many of the sector’s large- and mid-cap small-cap companies, whose aggregate increase of 27% and a healthy 44.5% share companies, 2019 was a good year. Large-caps revenues were up 19% and 21%, respectively, of these larger revenues (Fig. 3). In 2018, recovered from a miserable twelve months thanks to rapidly progressing pipelines and just 39% was reinvested into R&D. Seven during which generics, and portfolios, including across cancer and rare companies spent more than a billion dollars actual and threatened pricing curbs caused diseases. The top ten revenue-generating on R&D, including Gilead, which doubled investor caution. A new cohort of unicorns companies (including both product and its R&D spending to over $8 billion as it

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Box 4 | Rising R&D spending targets rare diseases

Sixty-six biotechs doubled or more than $222 million in 2019, up 132%. Biotechs United Terapeutics’ chart-topping doubled their R&D bills in 2019. Sixteen working on cellular therapies (Autolus 228% increase in R&D spend was due to an of those spent more than $100 million on Terapeutics and Rubius Terapeutics) and $800-million up-front payment to Arena R&D. Over half of those 16 are working on RNA-based medicines (Dicerna) were also Pharmaceuticals for a global license to drugs for rare diseases, including Akcea on the list. phase 3 pulmonary arterial hypertension (whose spend rose to almost $300 million, Investors are excited by the potential drug ralinepag, a prostacyclin receptor up 125%), newly listed immunology of RNA- and cell-based technologies to agonist. Enrollment into those late-stage player Gossamer Bio, autoimmune- and generate a range of new medicines. Rare trials is on pause. (Arena’s R&D spend also infammatory-diseases focused Viela Bio disease therapies continue to be attractive doubled in 2019; on June 1, the company (which in May 2020 raised another $169 thanks to unmet need, low competition took advantage of frothy public markets million via a follow-on stock ofering) and and relatively high prices — though these to raise $316 million in a follow-on share Netherlands-based Argenx, which spent dynamics may soon start to shif. ofering.)

receptors 1 and 2 to the Fc portion Table 4 | Top ten R&D spenders of 2019 of a human IgG1) and a higher Company R&D spending 2019 ($ millions) % change from 2018 profit-contribution from partner ’s Gilead Sciences 8,306 98% sales of atopic dermatitis drug Dupixent (dupilumab; a human IgG4 mAb targeting Amgen 4,116 10% the interleukin-4Rα subunit) (Table 4 Regeneron Pharmaceuticals 3,037 39% and Box 4). Biogen 2,265 –13% Beijing-based BeiGene, working on targeted immuno-oncology drugs; Vertex Pharmaceuticals 1,755 24% rare-disease companies Alexion and 1,174 228% BioMarin Pharmaceuticals; gene-therapy Incyte 1,154 –4% player Sarepta; and RNA interference BeiGene 927 37% (RNAi)-focused Alnylam Pharmaceuticals all spent more than half a billion dollars Alexion Pharmaceuticals 886 21% each on R&D. Sarepta Therapeutics 734 83%

Source: Ernst and Young New approvals, modalities — and sources of capital Cancer and rare diseases, plus RNA-based technologies, , ADCs and seeks to fill the hole left by its declining 17% driven by wet age-related macular gene- and cell therapies enjoyed continued HCV franchise. Regeneron’s $3 billion degeneration treatment Eylea (aflibercept; popularity in 2019, as reflected in the list R&D investment in 2019 was up almost a recombinant fusion of portions of the of highest R&D spenders, as well as those 40% on the previous year, leading to lower extracellular domains of human vascular with the biggest increases in R&D. These net income, despite revenue growth of endothelial growth factor (VEGF) new modalities were boosted by regulatory

Box 5 | Approvals keep investors interested

Alnylam’s growing product franchise — IgG1κ mAb conjugated to four molecules of $575 million of follow-on fnancing in its second drug, Givlaari (givosiran), the small-molecule microtubule-disrupting July, helped the company more than a synthetic siRNA molecule against agent monomethyl auristatin E (MMAE) double its value (to $19 billion) in 2019, 5-aminolevulinic acid synthase, was via a protease-cleavable maleimidocaproyl entering the top 10 biotechs by value. Tat approved for acute hepatic porphyria — valine–citrulline linker) for metastatic meant massive returns for the company’s caught the attention in early 2020 of urothelial cancer, was approved in largest shareholder, Baker Bros. Advisors, private equity group Blackstone Life December 2019; sales of its frst ADC a secretive hedge fund run by billionaires Sciences, which agreed to provide product, lymphoma treatment Adcetris Julian and Felix Baker, which frst invested $2 billion to bridge the group across to (brentuximab vedotin; an ADC comprising over 15 years ago. fnancial self-sustainability. Alongside a a chimeric anti-CD30 IgG1 mAb Seattle Genetics’ progress continued $750-million loan, Blackstone bought conjugated to four molecules of MMAE in 2020. Te FDA and the Swiss half the royalties owed to Alnylam by via a protease-cleavable maleimidocaproyl authorities approved small-molecule Novartis for cholesterol medicine inclisiran, valine–citrulline linker), which is sold kinase inhibitor Tukysa (tucatinib) as well as taking an equity stake. outside of the United States by Takeda, for use in combination with capecitabine Seattle Genetics’ second drug, Padcev reached $1 billion in 2019, even though and Herceptin () for (enfortumab vedotin-ejfv; an ADC US sales have slightly disappointed. patients with HER2-positive metastatic comprising a fully human anti-nectin-4 Tis, along with pipeline progress and .

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Table 5 | Top ten mergers and acquisitions of 2019 therapy encoding the human survival motor neuron (SMN) under the Target Acquirer Value ($ millions) Closing date control of a cytomegalovirus enhancer/ Celgene Bristol-Myers Squibb 74,000 3 January chicken-β-actin hybrid promoter) was approved for spinal muscular atrophy by Array BioPharma Pfizer 11,400 17 June the FDA’s Center for Biologics Evaluation The Medicines Company Novartis 9,700 24 November & Research division (Novartis acquired Loxo Oncology Eli Lilly 7,234 7 January developer AveXis for $8.7 billion in 2018); Spark Therapeutics Roche 4,300 25 February and Sarepta’s Vyondys 53 (golodirsen; an antisense phosphorodiamidate Audentes Therapeutics Astellas 3,000 2 December morpholino oligonucleotide) got the nod, Genomic Health Exact Sciences 2,800 29 July after an earlier rejection, for Duchenne ArQule Merck 2,700 9 December muscular dystrophy (DMD) in patients Synthorx Sanofi 2,500 9 December with a confirmed mutation amenable to exon 53 skipping. Ra Pharma UCB 2,300 10 October The high number of drug approvals in Source: BCIQ BioCentury Online Intelligence 2019 allowed several large-cap (valued at over $5 billion) yet loss-making biotechs to graduate from single- to multiple-product nods and growing confidence of their (zanubrutinib) for mantle cell lymphoma, companies, moving them a step closer to utility among prescribers and the physician a rare form of non-Hodgkin’s lymphoma; self-sustainability. Cancer company Seattle community. Last year, the FDA approved Alnylam’s Givlaari (givosiran), an Genetics, RNAi-focused Alnylam and 48 new medicines, more than in any year RNAi-based medicine for adults with acute antisense oligonucleotide developer Sarepta in the decade other than 2018, which saw a hepatic porphyria; and two gene therapies: were among them. Biotech companies’ bumper 59 approvals. Nearly half of the new the ex vivo Zolgensma (onasemnogene increasing contributions to overall drugs were for rare diseases, including rare abeparvovec; an adeno-associated viral medicines approvals means more companies cancers. They included BeiGene’s Brukinsa vector serotype 9 (AAV-9)-based gene with steady revenue streams (whether

Box 6 | Cancer and gene therapy dominates M&A ranks

Eli Lilly’s $7.2-billion purchase of biotechs came from Sanof’s $2.5-billion or twice a month; their sales have targeted-cancer drug pioneer Loxo cash deal in December 2019 for La Jolla, disappointed. Inclisiran’s mechanism Oncology strengthens Lilly’s oncology California-based immuno-oncology frm enables a more convenient twice-yearly portfolio and helps fll the $1.4-billion gap Synthorx — founded just fve years earlier subcutaneous dosing regimen — an lef by erectile dysfunction drug Cialis, hit from Floyd Romesberg’s lab at the Scripps advantage that the COVID-19 experience with generic competition in 2018. Loxo’s Research Institute, with a $6.25-million may amplify further still. Vitrakvi (larotrectinib) was the frst drug series A. Te company’s platform for Roche’s $4.3-billion Spark Terapeutics to receive FDA approval (in late 2018) for introducing unnatural amino acids allows purchase and Astellas’ $3-billion deal use on the basis of genetic mutation, rather new pharmacological properties to be to buy Audentes underscored gene than tumor location. Pfzer’s $11.4-billion encoded into lymphokines and other therapy’s successful ongoing journey from purchase of Array BioPharma in June . Synthorx raised about $230 experimental to established modality. was driven by a similar urge to build million in total, including $150 million in Spark’s Luxturna (voratigene neoparvovec) out oncology and catch up with domain its 2018 IPO. in 2017 became the frst AAV-based gene leaders Merck, Roche and the newly Not all of 2019’s multi-billion-dollar therapy to be approved in the United States, enlarged Bristol-Myers Squibb. Te draw: deals were around cancer. Novartis’s for retinal dystrophy caused by biallelic approved BRAF/MEK small-molecule $9.7-billion Medicines Company purchase, RPE65 gene mutation. Te company’s inhibitor combo encorafenib (Brafovi) and announced in November, bet on inclisiran, pipeline spans blindness, hemophilia and binimetinib (Mektovi) for BRAF-mutant an RNAi-based treatment licensed from lysosomal storage disorders. Audentes unresectable or metastatic , Alnylam for treating high cholesterol. Te brings to Astellas a ffh growth pillar also in tens of further clinical trials, for Medicines Company fled for approval in around genetic medicine, driven by lead indications including BRAF-mutant the United States and Europe. Novartis is clinical candidate AT132, which uses an metastatic colorectal cancer. hoping the drug, whose phase 3 trials were AAV-8 vector to deliver a functional copy Merck was not standing still in the race in atherosclerotic cardiovascular disease of the myotubularin 1 (MTM1) gene, whose to dominate the multiplying categories of and familial hypercholesterolemia, will absence causes the rare neuromuscular genetically targeted cancers. In December trump Amgen’s Repatha (evolocumab; disorder X-linked myotubular myopathy. 2019, it announced a $2.7-billion deal to a human IgG2 mAb targeting human Both Spark and Audentes will continue buy ArQule with its phase 2 oral Bruton’s proprotein convertase subtilisin kexin to operate as quasi-independent units tyrosine kinase (BTK) inhibitor for B-cell 9 (PSCK9)) and Regeneron’s Praluent within their respective parent companies — . () on the basis of convenience. a partial nod to Roche’s pioneering Evidence of the accelerated Tose drugs (which target the PSCK9 partnership more than two value-creation possible for cancer-focused protein itself) require injection once decades ago.

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Table 6 | Top ten licensing deals of 2019 Companies involved (role) Description Date Up-front cash announced ($ millions) Galapagos (licensor), Gilead Sciences Galapagos grants Gilead exclusive, ex-European product license and option 07/14/2019 3,950 (licensee) rights to develop and commercialize current and future programs Amgen (licensor), BeiGene (licensee) Amgen partners with BeiGene to expand oncology presence in China 10/31/2019 2,700 Roche (licensee), Sarepta Therapeutics Sarepta grants Roche exclusive, ex-US rights to develop and commercialize 12/23/2019 750 (licensor) SRP-9001 to treat DMD Alnylam Pharmaceuticals (licensor), Alnylam and Regeneron partner in a five-year deal to discover, develop and 04/08/2019 400 Regeneron Pharmaceuticals (licensee) commercialize RNAi therapeutics Adaptive Biotechnologies (licensor), Adaptive Biotechnologies partners with Roche’s Genentech unit to develop 01/04/2019 300 Genentech (licensee), Roche (other) personalized and off-the-shelf T cell therapies to treat cancer Akcea Therapeutics (licensor), Ionis Akcea grants Pfizer exclusive, worldwide rights to develop and commercialize 10/07/2019 250 Pharmaceuticals (other), Pfizer (licensee) AKCEA-ANGPTL3-LRx to treat cardiovascular and metabolic diseases Jazz Pharmaceuticals (licensee), PharmaMar grants Jazz Pharmaceuticals exclusive US rights to develop and 12/19/2019 200 PharmaMar (licensor) commercialize lurbinectedin Dicerna Pharmaceuticals (licensor), Dicerna grants Roche worldwide rights to develop and commercialize 10/31/2019 200 Roche (licensee) DCR-HBVS and additional therapies to treat virus infection Dicerna Pharmaceuticals (licensor), Dicerna partners with Novo Nordisk to discover and develop therapies for 11/18/2019 175 Novo Nordisk (licensee) the treatment of liver-related cardiometabolic diseases using Dicerna’s GalXC RNAi platform technology CRISPR Therapeutics (licensor), CRISPR grants Vertex exclusive, worldwide rights to its current and future 06/06/2019 175 Vertex Pharmaceuticals (licensee) intellectual property covering CRISPR–Cas9 technology, endonucleases, single- and double-cut guide and adeno-associated viral vectors to develop DMD and DM1 gene-editing therapies

Source: BCIQ BioCentury Online Intelligence

from product sales or royalties) that of the group’s pipeline of small molecules, Alnylam and Regeneron joined forces lenders feel confident lending to. In early spanning inflammatory diseases, fibrosis in April to discover, develop and sell 2020, private equity group Blackstone Life and osteoarthritis (Table 6). Notably, the RNAi therapeutics, primarily for eye and Sciences lent Alnylam $750 million as deal fell short of an outright acquisition: central nervous disorders. Elsewhere, part of a larger, $2 billion deal designed Galapagos maintains R&D independence, Lexington, Massachusetts-based Dicerna to bridge the biotech across to financial but can’t sell out to anyone else (or indeed to Pharmaceuticals — which, rather than 21-mer self-sustainability (Box 5). Gilead). The tie-up drove a 170% increase in double-stranded RNAs, uses Dicer-substrate Galapagos’s share price over the year, valuing 25/27-mer asymmetric double-stranded Billion-dollar babies the 20-year old company, which has yet to RNAs containing stabilizing RNA tetra-loops Acquisitions and partnerships, as usual, produce a marketed drug, at $13 billion by (DsiRNAs) — signed up Roche and Novo accounted for the lion’s share of public 31 December. Nordisk in the final quarter of 2019. biopharma financing in 2019. Merger and The rest of 2019’s top-ten licensing Most biotech companies aren’t in the acquisition (M&A) totals were dominated by deals featured the same heady mix multi-billion-dollar league. Many will have the completion in January of Bristol-Myers of oncology and rare-disease assets, started 2020 with much less generous cash Squibb’s previously announced acquisition of underpinned by oligonucleotide, gene- cushions; more than a few of those will have Celgene. The year’s M&A cash haul of $90.5 or cell-therapy technologies. Roche in seen their progress slowed or billion was below 2018’s $103 billion, but December paid $750 million for ex-US stopped by the pandemic, making lucrative there were 25% more deals worth over $1 development and commercialization rights deals or refinancing even less likely. The billion upfront (Table 5 and Box 6). Many of to Sarepta’s clinical-stage gene therapy sector as a whole may be weathering the them underscored the continued popularity SRP-9001 (an AAVrh74 vector containing a COVID-19 storm very well indeed, but of targeted oncology, immunology and codon-optimized human microdystrophin at company level, there will be plenty of rare-disease assets, as well as an increasing driven by MHCK7, a losers, too. ❐ confidence in experimental therapy platform cardiac-muscle-specific hybrid promoter technologies using oligonucleotide, gene- or comprising enhancer and promoter regions Melanie Senior cell-therapy modalities. of the murine muscle creatine kinase and London, UK. The ghost of Roche’s now decades-old α-myosin heavy-chain ) for DMD. yet pioneering partnership with Genentech Sarepta’s valuation had already doubled Published online: 30 June 2020 featured in 2019’s biggest partnership deal. during 2018 as revenues rolled in from its https://doi.org/10.1038/s41587-020-0593-1 Gilead’s ten-year tie-up with Galapagos, first DMD drug, Exondys (eterplirsen); the announced in July, included a $3.95-billion company finished 2019 another 25% higher, Additional information up-front payment and $1.1 billion in equity worth $9.6 billion — a whisker outside the Supplementary information is available for this paper at investment. It gave Gilead first dibs on all top 20 biotechs by market capitalization. https://doi.org/10.1038/s41587-020-0593-1.

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