What Does the Future Hold for Biopharma in 2022?

As 2021 ends, I find it hard to believe that we are still living on a daily basis with the ravages of COVID, despite the availability of life-saving vaccines and therapeutics—thanks to the tireless efforts of the biopharma ecosystem!

Just this week, leaders in the biopharma and finance industries implored JPMorgan to cancel its live Healthcare Conference, our venerable annual Woodstock. I host a Fabulous Pharma Females dinner there every year; my last was in January 2020, which seems like a lifetime ago. The hybrid virtual/in-person world we now live in no longer seems temporary, but rather the new “normal.”

Two years in, and the system is still in chaos. In my own little world, I move from one place with no masks to the next where wearing one is required. Proof of vaccination and frequent testing requirements are the new passports to navigating the world.

Following the reopening trade that propelled stocks and the markets to new highs, we were hit with the Delta variant, and walked it all back. Now, we are in the early stages of Omicron, which the WHO has designated a “variant of concern.”

While supplies of vaccines may be available in large quantities, many around the world still can’t get them—case in point, in South Africa, where travel bans are now in place, as they are in some countries in Europe as well as Japan.

What does this all mean for capital markets, and biopharma in particular?

As I write this, the S&P 500 is up more than 25% YTD, and the NASDAQ, which ran up 43.6% last year, is ahead another 24.6%. The S&P Biotech index (XBI), on the other hand, is down 13.4% this year following an epic gain of 48% in 2020. Despite this underperformance for biotech, the IPO market has continued to be strong, both in terms of number of deals—already beating last year’s record and dollars raised. Why?

• Lots of capital that needs to be invested; interest rates are historically low.
• The innovation renaissance is not confined to COVID but is in evidence across the industry with clear advances in gene therapy, gene editing, mRNA broadly, rare diseases, cell therapies, etc.
• Record numbers of new product submissions and annual FDA approvals.
• M&A is core to growth strategies with ample fire power to fuel deals. Leerink estimates that US and European large pharmas could have over $500 billion in cash to deploy by year-end 2022, and that does not include substantial borrowing capacity and stock available to issue.

There have been standout performers this year, one notable is Pfizer. Since the start of 2020, its shares have skyrocketed 80% to $54, adding $754 billion in market cap.

Geoff Porges at Leerink forecasts that cumulative sales of Pfizer’s Comirnaty vaccine will total $107 billion by the end of 2022. He further estimates that Pfizer’s cash balance could swell to over $76 billion from the current $29.7 billion (assume liquidation of its 32% ownership of GSK’s consumer business, or $60 billion without it).

Biotech has underperformed, but could we see a rebound in 2022?

• One could certainly argue that valuations entering this year were rich following the meteoric rise of many in 2020, but that’s changed, and they could represent more compelling value heading into next year.
• Investors have worried about the implications of the Biden administration and its stated goals to attack drug pricing head on, but the initiatives recently making their way through Washington appear fairly benign.
• The uncertainties around the future leadership of FDA also now appears to be on its way to a near-term resolution with the appointment of Bob Califf (seemingly industry friendly) sailing through confirmation.
• Finally, there appears to be lots of cash swirling around to fuel collaborations, partnerships, and M&A. Many biotechs also have lots of cash due to the generous capital markets environment of the last several years and are funded through multiple value inflection points.

Barbara Ryan is Founder, Barbara Ryan Advisors, and a member of Pharm Exec’s Editorial Advisory Board