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A Q&A with Bill Coyle, principal, ZS. ZS is a management consulting and technology firm focused on transforming global healthcare. In some ways, 2022 could be seen as a challenging year—at least financially—in biotech. Do you see those trends continuing? Although we see overall sentiments to invest in biotech turning positive in 2023 after a weaker 2022, the sector is expected to remain flat to slightly bearish amid an uncertain economic environment. We’re watching out for inflation- and recession-related concerns, the looming patent cliff (which will put $47 billion worldwide revenue at risk in 2023) and increasing regulatory scrutiny across the globe. M&A is expected to be a significant driver of the biotech sector in 2023. Large-cap companies are well cushioned and will continue to focus on M&A activities. The strong pace of innovation in small- and mid-cap biotech will make them attractive targets, especially those with late-stage and high-quality assets or with disruptive platforms. A backlog of companies seeking financing through IPOs is growing. IPOs will likely go on hold, and we’ll see limited opportunities in the VC market for biotech. Companies will lean toward creative financing options including PIPEs, licensing or royalty deals, debt financing and reverse mergers in 2023. Additionally, we saw a number of moves across the world in 2022 – in the U.S., in large EU countries, and even in Japan – aimed at curtailing drug prices / drug price growth. Policymakers will continue to seek ways to manage healthcare costs and drug costs, which continues to put downward pressure on the biotech sector. Is biotech/life science in a good place as we move into 2023? There are many reasons for optimism, though the sector faces real challenges, as well. The main reason for optimism is continued scientific innovation. We expect a number of next-generation therapies to launch in 2023, with 13 cell & gene therapies up for FDA decisions. Overall, we expect to see an uptick in FDA approvals after a 25% dip in 2022 versus 2021. Key challenges for ’23 are related to (as above) increased downward pressure on drug pricing, as well as tightening FDA guidelines around accelerated approvals. In the U.S., will President Biden’s support for life sciences make a difference in the short term? And will we see support for the life sciences in other countries? Governments worldwide are investing heavily to strengthen the biotechnology and life sciences sectors. They are considering multiple levers ranging from increased fund allocation to favorable policies designed to increase domestic manufacturing and R&D innovation for drug and vaccine development. Biomanufacturing is a frontier for future competition. Other priorities include streamlining regulations for biotechnology products, expanding access to bioscience data for companies and getting patients earlier access to medicines. The U.S. and China, the front-runners of advancements in life sciences, have been making investments to strengthen their position in global pharma and biotech market. The U.S. has committed $2.8 billion in federal spending via the National Biotechnology and Biomanufacturing Initiative. China has continued to promote domestic & global investment in its pharmaceutical sector and aims to increase pharma R&D spending in China to 10% of sales by 2025. The UK is focused on making itself a “science superpower and innovation nation” and expects to increase public R&D spending (across sectors) by 30% over the next three years. While these investments are positive for the life sciences industry, it is worth remembering that these three countries – any many more – continue to exert downward pricing pressure on drugs and are aiming to better to control growing healthcare costs. Three of the biggest areas of concern may be cancer, antimicrobial resistance, and sepsis—are there others? And what progress do you think will be made in these areas? Cancer remains one of the major disease areas of focus for the pharmaceutical industry. According to the International Agency for Cancer Research, cancer-related deaths are likely to rise by 72% by 2030. Drug development in oncology has seen a lot of activity in 2022 and will continue to be a priority therapy area for pharma companies in 2023, not only in terms of R&D pipelines but also across the M&A and investment landscape. Late cancer diagnosis—especially driven by the pandemic’s effect on screening—isanticipated to lead to an emerging mortality crisis and a growing trend of a higher proportion of advanced metastatic cancers. Government agencies are continuously implementing new initiatives to reduce cancer mortality rates, increase access to quality treatment and enhance access to cancer therapies. As has been the case over the past decade, we expect to see continued progress in understanding and treating the many, many forms of cancer. Antimicrobial resistance (AMR) is a major area of concern, but one that has found challenges drawing significant R&D investment without incentives to spur innovation. It is estimated that the death toll from antibiotic-resistant infections could rise to around 10 million per year globally by 2050, up from approximately 1 million currently. The relatively low average revenue generated from sales of novel antibiotics makes the research and development of next-generation antibiotics a risky and expensive investment for pharma companies. These economic challenges have led to a relatively thin pipeline of new antibiotics. Stakeholders, including governments, organizations and pharma, are developing innovative incentive models to boost revenues and encourage innovation. While sepsis kills an estimated 200,000+ people in the U.S. each year, and more than 680,000 in Europe, it is not an area that has attracted significant pharmaceutical investment focus. Much of the trial activity in the space leverages existing drugs, and scientific efforts in the space focus on better understanding sepsis, and on educating health care providers in effective identification and treatment of sepsis. The challenges mentioned above in tackling AMR also limit progress in battling sepsis. Alzheimer’s disease will be a key focus in 2023 and beyond, owing both to recently approved developments in the space (Leqembi – lecanemab, approved by FDA on January 6, 2023) as well as disappointing late-pipeline failures (Roche’s gantenerumab in November 2022). As the world’s population continues to age, the global economic burden of Alzheimer’s disease is expected to reach $4.7 trillion in 2030, and $16.9 trillion in 2050. Combatting Alzheimer’s will remain an important goal for the pharmaceutical sector. We’ve seen gene editing make big strides, and AI seems to be more in the public eye, are there other areas showing huge promise? Genomics (gene editing/engineering), AI and machine learning, and 3D printing have picked up significantly in the last few years. Genomics played vital role during the pandemic by serving as the basis of the mRNA COVID-19 vaccines and by dramatically accelerating the drug discovery process. 3D printing powered on-demand solutions that helped quickly produce ranging from personal protection equipment to medical devices. Other technologies such as blockchain, augmented reality and virtual reality, digital twin and quantum computing have vast potential within next 3-5 years and are likely to experience significant growth driven by strong regulatory support and increasing investments. Can biotech help in other areas, such as climate change, food security, etc.? Apart from developing diagnostics, vaccines and treatments for diseases, biotechnology also is providing solutions to world’s most pressing health and nonheath issues. Modern biotechnology is providing breakthrough products and technologies to reduce negative effects on the environment; ensure cleaner energy, water and air; reduce poverty and hunger; and support safer, cleaner and more efficient industrial manufacturing processes. Additionally, biotech can help protect biodiversity and maintaining balance within the world’s ecosystems. Will sustainability become more important for biotech and life science companies in 2023? Sustainability has become a major trend across different industries including biotech and pharma. The pandemic accelerated efforts by companies to take on new environmental, social and governance (ESG) targets. In 2023, we expect pharma to develop new technologies that significantly improve the sustainability of research workflows and bioprocesses, while encouraging equity within their organizations, for their consumers and for their communities. Pharma companies such as Pfizer and Merck have launched sustainability bonds, or specific financial allocations to support their future sustainability efforts. Biopharma companies have been committing to sustainability through efforts across three key areas: environmental, social and operational sustainability. While the majority of their efforts have skewed toward environmental concerns, social and operational sustainability is gradually picking up more focus.

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