Biopharma R&D Growing Stronger

Episode Summary

Executive Summary: IQVIA’s Murray Aitken says 2023 marked a reset from the pandemic-era funding bubble, with biopharma R&D, M&A, and trial activity moving back toward pre-2020 trends. AI is gaining acceptance but has yet to show broad productivity gains, while patent cliffs, ADCs, obesity drugs, cell and gene therapy, and China are key drivers of 2024 activity.

Main Topics: Post-pandemic normalization of biopharma R&D (Priority: 5/5): Aitken argues 2020-2021 were exceptional outlier years driven by COVID-19 and a flood of capital; 2023 reflects a reversion toward pre-pandemic trend lines rather than a structural collapse. AI in drug discovery and development (Priority: 5/5): AI is widely viewed as promising and no longer dismissed, but actual measurable impact remains limited and difficult to track; trust and integration into workflows are major barriers. M&A rebound and patent cliff dynamics (Priority: 4/5): Deal values rose in 2023 as sentiment improved, and an upcoming patent cliff is expected to spur sustained acquisition activity because pipelines are fuller than in the prior cliff cycle. Clinical trial volume and portfolio shifts (Priority: 5/5): Trial starts fell in 2023 due to fewer COVID studies, reduced emerging biopharma starts, and lower large-company multi-study programs, reflecting both financing constraints and changing portfolio priorities. Hot therapeutic areas: ADCs, obesity, cell/gene therapy, mental health (Priority: 4/5): The transcript highlights concentrated activity in antibody drug conjugates, obesity/GLP-1 programs, cell and gene therapies, and psychedelics in depression, each with notable strategic and commercial momentum. Industry productivity and success rates (Priority: 4/5): Composite clinical success rates improved in 2023 to the highest level since 2018, suggesting better R&D efficiency, though Aitken cautions it may reflect lower risk-taking rather than a lasting step-change. Emerging biopharma financing and China (Priority: 3/5): The health of early-stage biotech financing remains a major watch item, and China is increasingly important as a global innovation source and outbound pipeline contributor.

Key Arguments: 2020 and 2021 were exceptional, pandemic-driven bubble years; 2023 should be read as a return toward the pre-pandemic baseline rather than a sector-wide deterioration. AI has clear scientific promise and broad acceptance, but measurable productivity gains are still limited because adoption, trust, and workflow integration lag behind the hype. M&A activity is rising because macro sentiment improved and buyers/sellers are reaching agreement on value, especially in hot areas like ADCs. The new patent cliff should increase deal-making, but unlike the last cycle the pipeline is not depleted, so companies have more assets to acquire or partner with. Clinical trial starts fell mainly because of fewer COVID studies, reduced starts by cash-constrained emerging biopharma, and fewer large-company multi-study programs. Rare disease and oncology remain resilient because oncology is fragmenting into more precise rare subsegments and rare diseases often have higher success rates and shorter regulatory paths. A higher composite success rate in 2023 is encouraging, but it may be partly due to more conservative risk selection rather than a permanent productivity breakthrough.

Data Points: Global biopharmaceutical R&D funding: $72 billion - 2023 funding level, up from $61 billion in 2022. Biopharmaceutical M&A activity: $140 billion - 2023 deal value, up from $78 billion in 2022. AI-originated trial starts: About 30 trials - Trials started last year involving assets originated from AI research companies. Total trial starts: About 5,000 trial starts - Benchmark used to contextualize AI-originated trials. Market-share of ADC deals among >$2B deals: 6 of 31 deals - ADCs represented six of the 31 deals above $2 billion in 2023. Share of large oncology deals: About half - ADC deals accounted for about half of oncology deals over $2 billion. Patent-expiring revenue: About $200 billion annually - Revenue at risk from products whose patents expire by 2030. Clinical trial starts decline: Down about 22% from 2021 - 2023 announced/actual trial starts compared with 2021. Emerging biopharma spending threshold: Less than $200 million per year - Definition used for emerging biopharma companies in the analysis. Obesity pipeline molecules: 124 molecules - Active clinical development programs at end of last year. Obesity molecules by mechanism: About one-third GIP/GLP/glucagon receptor agonists; 65% other mechanisms - Shows diversification beyond existing GLP-1-like mechanisms. Obesity oral formulations: Almost half - Nearly half of active obesity molecules are oral formulations. Obesity phase breakdown: About 8 in phase 3; about 50 in phase 2 - Shows depth of late-stage and mid-stage obesity pipeline. Cell and gene therapy trials: About 600 trials started in total - Large trial volume in 2023. Cell and gene therapy sponsorship: About two-thirds industry-sponsored; one-third non-industry - Composition of cell and gene therapy trial starts. CAR-T trial starts: 4 in 2013; 150 over the past three years - Illustrates growth in CAR-T development activity. Depression trial starts: Down in 2023 - Decline attributed partly to heavy starts in 2021 and 2022. Psychedelics in depression trials: Nearly 40% - Share of depression trial starts involving psychedelics in 2023. Composite success rate: 10.8% - 2023 cross-stage success rate across the development continuum. Prior-year composite success rate: 5.9% - 2022 composite success rate for comparison. 10-year average composite success rate: 7.6% - Average success rate over the past decade.

Pivotal Quotes: "the years 2020 and 2021 were truly outlier years, exceptional years, bubble years, you might think of them as" — Murray Aitken: Describing how pandemic-era funding distorted R&D and investment trends. "I don't think I see anyone who's dismissive of the potential impact of AI, particularly in discovery research." — Murray Aitken: Explaining the industry’s changed attitude toward AI. "The difference, by the way, is back then... there was this sort of existential question of whether the pipeline was running dry" — Murray Aitken: Contrasting the upcoming patent cliff with the last major patent-cliff cycle.

Implications: Biopharma is entering a more normalized but still active phase: capital is tighter, but pipelines are strong, M&A is likely to stay busy, and therapeutic hotspots plus AI will shape competitive advantage. Execution and trust—not hype—will determine which technologies truly improve productivity.