JP Morgan’s 41st Annual Healthcare Conference came and went this year in its usual flurry of activity, as healthcare and life sciences industry leaders gathered in San Francisco to present the most pressing issues and trends facing investors face next year. It was also the first time the annual conference was held in person since the start of the Covid-19 pandemic.
The healthcare and life sciences industries experienced a difficult 2022 due to stalled IPOs and plummeting valuations. Many companies found themselves at the end of their cash trails and were left with the difficult choice of either scaling back operations or seeking funding at a lower valuation to keep the lights on.
However, 2023 has a brighter outlook. Big Pharma is now looking to innovate to fill IP portfolios, and investors see the promise of M&A and other strategic collaborations on the horizon.
Following another insightful conference this year, these are some of the key transactional trends to expect from the healthcare and life sciences industry in 2023.
Loss of exclusivity will drive deals
Many large pharmaceutical companies face the loss of regulatory exclusivity or patent protection for their most profitable products and will lose significant market share to generic and biosimilar competitors. Pharmaceutical companies are pursuing a variety of strategies to fill the revenue gaps holding them back, whether it’s rebalancing their intellectual property portfolios or moving new blockbuster products down the research and development (R&D) pipelines.
But pharmaceutical companies are also targeting business development. As biotech companies deal with innovative products and potentially need an infusion of cash, mergers and acquisitions or other strategic collaborations are also on the table. However, the terms of the deal will likely be dictated by how far along a product is in the research and development process. As early-stage product acquisition gains momentum, risk allocation will be key. This means we will see more contingent fee structures and deal terms that address potential regulatory and approval hurdles.
The FDA has accelerated the implementation of the approval program
The Federal Drug Administration (FDA) has been criticized for the administration of its accelerated approval program, which allows drug manufacturers to obtain accelerated approvals for drugs that address unmet medical needs. Although confirmatory trials are required to establish a drug’s benefit after initial approval, the FDA has historically not mandated the completion of definitive trials, nor has the FDA always required drug manufacturers to remove a product from the market after a trial failure.
But the winds of change are here. Expect an overhaul of the FDA’s accelerated approval process in 2023, with greater emphasis on timely confirmatory trials of drug indications after accelerated approval. And while a failed or inconclusive trial may not warrant an automatic product recall, the FDA can also insist on a product recall if drugmakers fail to conduct timely trials.
Focus on health equity and value-based care
If there’s one thing the pandemic has brought to the forefront of everyone’s mind, it’s how disparities in access to care and other social determinants of health can affect patient outcomes and health care costs. The market is also shifting towards value-based models, with organizations moving towards a holistic, integrated approach to patient care. Investors see the benefits of pursuing equity and quality in healthcare, which can ultimately reduce costs, mitigate risk and improve patient outcomes.
Life sciences companies are also shifting to a diversity mindset for R&D. For example, recent developments in mental health treatments, such as those targeting postpartum depression and schizophrenia, are filling gaps in care for previously marginalized groups.
In 2023, mergers and acquisitions may begin to shift to those organizations that defend quality and capital strategies that align with investors’ goals. Strategic collaborations may be another viable option for organizations seeking innovative new models and integration of care. Health sciences companies and acquirers will also need to consider how value-based care models may affect the financial risk and marketability of a product or service as they evaluate deal potential.
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