The U.S. President Trump’s coming into power and the new FDA Commissioner’s taking office have brought new changes to the biological and pharmaceutical industries. We still do not know how the medical insurance payment system will be reformed, and how the future trends of pharmaceutical industry supervision and new drug approval will change. FDA has taken continuous actions in generic drug, biosimilar and orphan drug approval, and introduced policies one after another, to strive for relaxation of regulation and increase of competition, to have drug prices return to value pricing. Therefore, FDA may create an unprecedented new prosperous period of drugs. An authoritative report has been issued by EP Vantage under Evaluate Pharma recently to focus on the pharmaceutical & biotech industry development in the first half of 2017. In the followings, I will analyze some trends of the industry development in combination with more specific events.

I. Market values of big companies had stable performance, and IPOs were active

In the first half of 2017, as FDA sent out positive signal to generic drug & biosimilar approval, the U.S. biotechnology indexes were in the red in June, reaching the highest level since 2015, and NASDAQ composite index also reached an 18-month high (see the following figure).

1. The market values of pharmaceutical giants steadily rose overall: especially AbbVie and AstraZeneca, while the market values of BMS and Teva declined slightly. The pharmaceutical industry performs steadily in 2017, wherein, the market values of AbbVie, J & J, AstraZeneca and Loxo Oncology, etc. have strong growth: a) AbbVie is invincible with the miracle drug Humira which continued to keep strong growth in the first half, and AbbVie has good news in other R&D pipelines such as the approval of the pan-genotypic cocktail therapy anti-HCV drug Mavyret; b) AstraZeneca’s blockbuster drug Imfinzi had achieved pleasantly surprising interim results in the Phase III study of PACIFIC, and received the breakthrough therapy designation issued by FDA for the treatment of patients with early non-metastatic NSCLC (non-small cell lung cancer) whose disease has not progressed following standard platinum-based chemoradiation therapy, which was an important reason for the firm stock price of AstraZeneca; c) However, BMS seemed to not go well in the first half: BMS had outstanding advantages in PD-1 patent fight, but the failure of Opdivo in NSCLC first-line therapy had BMS step into the shadow and Opdivo just seems to wait for the surpass of Keytruda; d) The generic drug giant Teva has been experiencing a price crisis recently, and the further reduction of the generic drug prices makes the market value of Teva plummet. Teva plans to close 15 factories, lay off 7,000 employees and exit some markets…

2. IPOs started to roar back: the IPO scale exceeded USD 1 billion in 2017 Q2. The strong growth of IPOs in 2017 Q2 changed the declining tendency, with IPO scale exceeding USD 1 billion, reaching a new high since 2015 Q3. There were 23 IPOs in total in the first half of 2017, with 2 exceeding USD 100 million, and average of USD 63 billion, flat compared with that in the year of 2016.

II. M&A boom continued to fall back

J & J’s USD 30 million takeover of Actelion was the biggest M&A event in the first half of 2017, however, other than this, the M&As were quite weak. M&A is inevitable to the pharmaceutical industry due to patent cliff, generic drug impact and uncertainty of new drug R&D. There were 85 M&A deals in the first half of 2017, amount to about USD 49.3 billion which was a new low.

To avoid the high taxes in the U.S., pharmaceutical giants use the reasonable tax avoidance, resulting in the tax inversion which is struck by the U.S. Department of the Treasury, including restriction of overseas enterprises’ ability in reverse takeover of the U.S. companies and restriction of earnings stripping, which is one important reason for the inactivity of M&As; in addition, pharmaceutical giants become increasingly cautious in M&A deals, and increasingly cautious about buying biotechnology with high valuation.

III. FDA was active in new drug approval, with the total number of new drugs approved in the half year having surpassed that of the year of 2016

I have separately detailed the new drug approval situations of 2017Q1 and Q2. Overall, the new drug approval in the first half of 2017 showed the following trends: 1. As of July 19, 28 new drugs had been approved by FDA in the first half year, exceeding the total of 2016; FDA continued to exert force in orphan drug approval, and there are 43 new drugs expected to be approved for marketing in the year of 2017; 2. New drugs have high quality, wherein, many drugs have the blockbuster potential, such as the atopic dermatitis drug Dupixent, multiple sclerosis drug Ocrevus, and antitumor drugs (Imfinzi, Kisqali and Bavencio).

It is noteworthy that 2017 will witness the approval of the first CAR-T drug: the relevant CAR-T product of Novartis has been unanimously recommended by the advisory committee and will be marketed in October 2017, which will make a significant impact on the pharmaceutical industry. Furthermore, FDA will also do something regarding the heavy payment pressure brought to the U.S. by rare diseases and tumors, etc., to drive prices down to reasonable levels.

By Tang