2019 was an incredible year in biotech, not just for my family personally but for patients around the world. The FDA approved 48 novel drugs, which it defines as “innovative products that serve previously unmet medical needs or otherwise significantly help to advance patient treatments,” that have never before been approved or marketed in the U.S., including a one-time gene therapy to cure babies born with spinal muscular atrophy (SMA), the first targeted treatment for the root cause of sickle cell disease, the first drug specifically for the treatment of postpartum depression, and many more. Twenty-one of the 48 novel drug approvals were for rare diseases, those that affect 200,000 or fewer Americans, many of which have few to no treatment options. Among these approvals was a therapy that finally worked for my son with cystic fibrosis. After 17 years of waiting, 2019 was the best year we’ve ever had, a feeling I share with parents and patients across the country who have new hope because of breakthrough treatments approved or on the horizon.
Of course, the new drugs approved last year took at least a decade and billions of dollars of investment before reaching patients. Already, we are seeing signs that the investments necessary to fund the next generation of therapies may be slowing because of the political environment in the U.S., including uncertainty around trade deals and tariffs, new rules for foreign investments from CFIUS, increased scrutiny on drug pricing, and overall political volatility. In 2019, venture capital investment in Massachusetts biopharma companies declined to just over $2.1 billion, from 2018’s record-setting $4.5 billion, according to Evaluate data. The number of deals also declined by 22% in 2019, with 57 deals compared to 73 in 2018. The average deal size in 2019 was $36.9 million, 40% lower than 2018’s $60 million. There were only three $100 million-plus deals in 2019 compared to eight in 2018. However, we shouldn’t blame politics for the totality of this change. 2018 VC funding levels were historic and 2019 is likely a correction back to prior year levels.
As we begin 2020, the drug pricing debate at the federal and state levels will continue to slow investment in the industry. Government price controls in Massachusetts and federally will spook investors who rely on healthy returns for their risky investments, and 2020 presidential candidates will arm their campaigns with promises to lower drug costs. Although this will undoubtedly impact future drug approvals if the most radical drug pricing proposals become law, we’re unlikely to feel their full effect in 2020. Approvals for rare diseases will continue to rise, as will one-time cures in the form of cell and gene therapies.
The startup community will feel the impact of decreased investment the most, but this will lead to further collaboration and M&A activity among big pharma and biotech. According to the Chimera Research Group, there were 28 biotech mergers & acquisitions announcements in 2019, a number I expect to increase in 2020. Big pharma will continue to rely on the innovation inside small biotech companies to fill their pipeline and will continue to look to the Massachusetts ecosystem to meet their needs. Due to a decline in venture capital investment, small biotech will have to engage in more M&A activity with big pharma to commercialize their products.
I urge local and federal politicians to act cautiously when considering radical reform to drug pricing, as patients will ultimately pay the price for stifled innovation. Although we may not feel the effects this year, future innovation will suffer if the most harmful legislation is passed. Instead of demonizing an industry that’s creating new tomorrows for patients around the world, we must look holistically at solutions to lower patients’ out-of-pocket costs, increase transparency among all healthcare stakeholders, and support innovative ways to finance breakthrough treatments. 2020 will not be without its challenges, and it’s up to all of us to advocate for a brighter future for drug discovery and development, and ultimately patient lives.
We’ll undoubtedly see some of you at J.P. Morgan Healthcare Conference in a few days, and for those that would rather stay local, we’ll address the investment landscape, drug pricing debate, and the future of Massachusetts biopharma at MassBio’s Annual Meeting, the State of Possible Conference in March.