Biopharma Industry Review: A Year of Challenges and Changes in 2023
The biopharma industry experienced a challenging year in 2023, marked by a significant decrease in funding and a high number of bankruptcies. According to PitchBook, the industry raised approximately $24 billion in 2023, a stark decline from the higher funding levels of the previous three years, which saw annual figures of $38.1 billion, $53.9 billion, and $36.9 billion, respectively.
Exit activities also slowed down, with only 84 deals totaling $17.9 billion. This decrease was largely attributed to fewer initial public offerings. The sector also witnessed the impact of a biosimilar onslaught and a steep patent cliff, with several drugs losing exclusivity by the year's end.
Adapting Strategies Amid Economic Pressure
Faced with this challenging business environment, companies across the biopharma sector have been compelled to rethink their market strategies and cut costs. This has led to reductions in investments in research and development (R&D), streamlining of product pipelines, and widespread layoffs.
Biogen, for instance, reduced its workforce by 1,000 employees, about 11% of its total staff, as part of a $1 billion cost savings initiative. After acquiring Reata Pharmaceuticals for $7.3 billion, Biogen further cut 113 positions at Reata’s Texas facility.
Pfizer also announced significant layoffs, cutting around 500 workers from a U.K. facility and 100 jobs in Ireland, under a $3.5 billion cost reduction plan. The company is now looking at an additional $500 million cost realignment, targeting total savings of $4 billion by the end of 2024.
M&A Highlights and GLP-1 Drug Market Expansion
Despite these challenges, mergers and acquisitions (M&A) saw a revival in 2023. Pfizer's acquisition of Seagen for $43 billion and AbbVie's purchase of ImmunoGen for $10.1 billion highlighted the ongoing interest in the antibody-drug conjugate (ADC) market, especially in oncology. According to PwC, similar levels of M&A activity are expected in 2024, with increased focus on weight loss and cardiovascular diseases.
The GLP-1 market, particularly for weight loss, continued to thrive. Novo Nordisk's Wegovy and Eli Lilly’s Mounjaro (used off-label for weight loss) achieved blockbuster sales, and Lilly’s obesity drug Zepbound received FDA approval, intensifying competition in the weight-loss drug market.
Pharma's Response to Inflation Reduction Act
Another significant development in 2023 was the pharmaceutical industry's response to the Inflation Reduction Act’s Drug Price Negotiation Program. Initially opposing the act's price negotiation provisions, Big Pharma eventually participated in negotiations for the first 10 drugs selected for Medicare price talks. The final negotiated prices, effective from 2026, will be published by September 1, 2024.
As the biopharma industry bids farewell to a turbulent 2023, the sector braces for continued challenges in the coming year. While hoping for an improved business environment in 2024, the industry may still face similar hurdles, with additional regulatory uncertainties looming in the wake of the upcoming presidential election.
