The arrival of 2024 may indicate a delicate period for those working in biotechnology. It is a fact that, the Brazilian market of Biotechs never achieved the ideal scenario. However, important advances occurred, especially starting in 2020, when the Covid-19 pandemic ushered in a new race for collective survival.
However, the current situation is not only delicate for the Brazilian industry. After the J.P. Morgan Healthcare Conference, held between January 8 and 11 of this year in California (USA), the experts' conclusion is that there is a”cautious optimism” on the air across the sector.
The reasons for this lie in the latest major market movements. Among the aspects negatives, we can cite:
- Em 2023 the biotech companies listed on the stock exchange saw a drop in the purchase price of shares. Experts associate the scenario with the expectations associated with medications such as Wegovy and Ozempic, in addition to the increase in interest rates in the United States;
- Mass layoffs occurred at more than 150 pharmaceutical companies;
- Consequences of the collapse of Silicon Valley Bank splash on biotechs;
- Decision of the U.S. Federal Trade Commission of Process the Sanofi, claiming that the brand would be eliminating competition and creating a monopoly if it acquired Maze Therapeutics;
In parallel, the events positives were:
- The drug's resounding sales success Semaglutide (also known by the names Ozempic, Wegovy and Rybelsus), indicated for metabolic diseases such as type 2 diabetes and obesity;
- Several new acquisitions made by the pharmaceutical industry in 2023;
In addition to this, the market's expectation is also in the next decisions of Food and Drug Administration (FDA), the United States health regulatory body, which will soon decide on new treatments for Alzheimer's and some types of cancers.
Another significant movement occurred in the last week of January of this year, when another positive sign appeared: the American one CG Oncology, which develops therapies aimed primarily at patients with bladder cancer non-invasive muscle, it debuted on the American stock exchange, raising 380 million dollars in initial public offerings (Initial Public Offering, in English).
In addition, a Report of PwC points out that the biopharmaceutical industry is expected to generate between 225 and 275 billion dollars in 2024. The conjuncture of these elements leads to some unprecedented trends. See below.
Trends
1. BioTech x TechBio
The maturation of the markets culminated in the creation of a new term: bio technology (techbio). This inversion between 'bio' and 'tech' may not give off much confidence right from the start, but the justification is plausible and important for the sector's next steps.
Biotechnology is a term that encompasses innovation not only in health, but also the development of resources to optimize the agricultural, industrial, environmental and even animal sectors. Therefore, when we look at health biotechnology companies, there is what we call”Bio Therapeutics”. Term intended for companies focused on the development of drugs whose production is based on biological and not synthetic sources.
That way, Techbio would be a new branch of the segment. That's because the term refers to companies that From the start focus on collecting, treating, and integrating biological data, with the purpose of generating other active compounds. It is also common for these initiatives to rely on artificial intelligence software to optimize the process.
When this type of 'speciation' happens - that is, the creation of a new species - there is also a need to establish new metrics, so that the market evaluates startups in a fair and assertive manner. In this sense, Lucas Ariel, one of the founders of Mirscience Therapeutics, and Pedro Penna, founder of NAIAD Drug Design, agree that understanding the sector is one of the greatest difficulties when it comes to attracting investment, which could be facilitated by establishing appropriate metrics for each sub-segment within what we call biotechnology.
On his personal blog, the startup's founder and head of research NewLimit, Jacob Kimmel, suggests three criteria for including an initiative in this new term:
- Bio technology companies are those that build a 'In silico model'— that is, a computer system capable of developing models of pharmacological processes. According to one paper, from researchers from University of Virginia Health System (USA), this model would be a form of extension of controlled experiments 'in vitro' - that is, carried out in the test tube in the laboratory. Thus, it is possible predicting the effect of the molecule on different parameters.
- Techbios collect and make the curating of a database, accurately and completely describing different biological systems;
- Starting from models of prediction and validation, these organizations add value to the clinical research process: they can make it faster, cheaper, or more effective.
Differentiation also serves to help establish metrics assertive enough to attract investment. "While biotechs are companies that focus on classic biochemical and pharmaceutical techniques, 'techbios' focus on integrating intensive data science analysis with classic techniques. Within these companies we talk about various metrics, so not only the potency and safety of possible new drugs, but we also evaluate the scalability that computational techniques and specific data can generate in the process as a whole”, explains Pedro Penna, from NAIAD Drug Design. That is, they answer the questions of:
- How does the platform validate or propose targets of interest?
- How does the platform propose new molecules that alter the function of targets of interest?
- How scalable is the platform, in relation to proposing new targets and/or identifying new drugs for these targets in question?
- What advantages can the platform bring compared to classic drug development techniques? (Ex: speed of development, cost reduction, access to new chemical structures with great chemical treatability, among others).
2. Different types of diseases are highlighted
As for the 'target diseases' of the biotechnology market, the changes are associated with population aging, “which makes this market with such high longevity”, says Lucas Ariel, founder of Mirscience Therapeutics.
Therefore, in the researcher's view, “cancer will always be a trending disease, but now it will be among the metabolic diseases, Muscular and Neurological”, completes. However, cancers in particular undergo important transformations in their landscape.
Starting with the brief decline in leadership, which began during the pandemic: between 2020 and 2021, the Covid-19 crisis meant that investments in cancer research were reduced by 9% (compared to the years 2018 and 2019), according to National Cancer Research Institute (NCRI), from the United Kingdom.
Even so, the investments made over all the years before, during and after the pandemic seem to have been well spent. A sign of this is that cancer is becoming less deadly, as indicated by 2024 report of American Cancer Society (ACS).
On the other hand, although it kills less, cancer tends to affect more and more people. Still according to ACS data, while at least 4 million deaths Due to cancer prevention in the United States, from 1991 to the present day, new diagnoses are expected to reach 2 million this year. In other words, it would be the equivalent of 5,480 new reports per day or a new case every 15 seconds. In Brazil, the National Cancer Institute (INCA) estimates 704,000 new cases for the years between 2023 and 2025.
Following this pace, “cancer is increasingly becoming a chronic disease,” he says Rogério Vivaldi, a doctor specializing in rare diseases, responsible for placing 26 new drugs on the market and former leader of startups such as Spark Therapeutics, Bioverativ and Sigilon - which were later acquired by the pharmaceutical companies Roche, Sanofi and Eli Lilly.
Vivaldi explains that “the word cancer encompasses a very broad idea, but if you are of the specific type, it may end up being a group of rare diseases. Because it's a molecular disease, so if you're going to have treatments that address that molecular problem, the methodology and mentality of a rare disease also apply to cancer.” All of this means that, by finding solutions for one type of disease, it is possible to find ways to solve others as well.
In science, knowledge is integrated with each other, which is why investing in research for other diseases is also important. In addition, the current and future scenario of neurodegenerative and metabolic diseases also calls for urgent measures.
According to the report of Global Burden of Diasease (GBD), published in the Lancet Public Health, up to the year 2050 dementia should triple among adults aged 40 and over. This is a scenario in which the numbers go from around 57 million cases in 2019 to 153 million. Specifically in Brazil, the estimate is for an increase of 206% in new cases, which may reach the level of 5.6 million people diagnosed with the condition by the middle of the century.
As for metabolic diseases, there was a steady increase worldwide, over the course of 2000 to 2019, indicates another GBD report, published in Cell Metabolism. Among the highlights of the research, is that type 2 diabetes and obesity were metabolic diseases that saw little reduction in mortality over those years - while hypertension and others had a slight decrease in certain periods.
In short, the demand for new therapies will not cease in the near future.
3. The race for the new “ozempic”
Drugs based on the active ingredient semaglutide were successful enough to set a new standard in the pharmaceutical industry. For example, the revolutionary technology of Ozempic, developed to aid in weight loss and treatment of metabolic diseases, it was able to remove LVMH — a luxury goods group led by Bernard Arnault — ranked as the most valuable company in Europe, replacing its Danish manufacturer Novo Nordisk.
In addition, in the third quarter of 2023 alone, the pharmaceutical company achieved 1.3 billion dollars in net profit. No wonder the company reached 460 billion dollars in market value. Given the resounding results, several startups started looking for an “ozempic” technology to call their own.
Expectations for the year
“Since Covid-19, there has been a very large reduction in the funding of most biotechs, such as I have never seen in the last 20 years. There is a difficulty Much bigger In financing an amount of money Much smaller, in addition to the loss of value of large companies. All of this caused investors to lose a lot of money,” explained Rogério Vivaldi when asked about the prospects for the coming year.
The rare disease specialist continues, stating that “2024 tends to be a year of recovery, but we need to be aware of cost-efficiency. That is, to understand how to use the money in the best possible way, because the money will not be like it was 6, 10 years ago, at that time it was much easier to raise funds”.
In this sense, the expert reinforces that investors in the health market need to be fully aware of how to allocate resources in the best way, evaluating whether the workforce scaled up for work is the best in terms of talent and costs. “Perhaps this is a great advantage of Brazil, we have lower costs with scientific labor,” adds Vivaldi.
But why is it difficult to attract investments?
In 1999, the Brazilian government published what we now call the “Generic Law”, which authorized any laboratory to sell drugs with expired patents. Although relatively recent, the decision is still one of those that is in the spotlight in the Brazilian biopharmaceutical industry.
Since then, this branch of the market has expanded year by year. To give you an idea, PróGenéricos indicates that the sector, which has 88 manufacturers in Brazil, earned about 15.3 billion reais in public-private partnerships (PPP) in the year 2022 alone. In the same year, sales increased 7% compared to 2021, reaching the milestone of 1.8 billion boxes sold. Even so, the generic market is still equivalent to 35% of the industry in Brazil, compared to 90% seen in the United States.
On the other hand, investment in this segment ends up overshadowing initiatives that develop new treatments. “The problem is that the generic area alone already generates a lot of money. In addition, in the private sector, investors don't follow the segment much, so they don't understand much either, and since money is already being made with other things, the appetite for risk decreases,” says Lucas Ariel, one of the founders of Mirscience Therapeutics.
Second, there is the fact that many do not understand how clinical research works and other specificities of the health market. Before the Covid-19 pandemic, research used to take 10 to 15 years to fully develop a new substance. However, with the health crisis, for the first time, the world saw time reduced from years to months. However, in general, companies still rely on extensive molecular tests and research phases to discover if a substance is effective, efficient, and safe. So the development time is not yet as short as investors would like.
In the reality of startups, the conflict lies in obtaining investment while in the early stages, given that “today's investment funds are increasingly selective, wanting companies very close to the clinical stages or already in the clinical phase. Pharmaceutical companies are opting for diseases that are generally of great value to the market, in other words, drugs that in one year can reach one billion in market value, one billion in sales,” adds Lucas.
In this regard, artificial intelligence appears as a good auxiliary tool, but to be successful it depends on well-collected and treated data. In biotechnology, this is a growing trend, but not consolidated enough to change market parameters at this time.
Finally, Lucas also claims that it is difficult for new entrepreneurs understand the elements that lead an investment fund to approve an initiative or not. Starting in the academic universe, it is common that the orientation for entering the business world is not as complete as it should be. This would be a side effect of the lack of integration between universities and Brazilian industry.
To better understand the issue, it is worth recalling some of what happened in Brazil during the health crisis, what it was like before it appeared, and some intrinsic factors of the biotechnology market in Brazil and in the world.
Origin x Solutions
When it comes to biotechnology, Brazil is far from being among the top finishers. In fact, according to the Magazine report Nature, published in June 2022, Brazil is among The 10 countries that do not have publicly traded biotechnology companies on the Stock Exchange. Following the Brazilians, the following are on the list: Iceland, Luxembourg, Portugal, Estonia and others.
Among the countries with the most biotechs with shares on the Stock Exchange, countries such as Switzerland, Sweden, the United States and Israel stand out. However, what makes these countries at a much more positive level than Brazil?
The answer to that question: long-term investment, supported by constant efforts to build a health ecosystem capable of bringing discoveries made in laboratories to the market, so that it reaches the maximum number of people in the shortest possible time.
In the United States, for example, the focus on biotech is able to exist thanks to the creation of large technological research and development centers, such as Silicon Valley in San Francisco, the biotech center in Boston and research and machinery in San Diego. In Europe, England also stands out as a center for the massive development of drugs and the discovery of new molecules.
“[...] In Brazil, there has never really been this view of radical innovation in a long-term plan. We have good universities in Brazil, which would be great research centers, but the university ended up creating a very large ivory separator that created some of this' public 'versus' private 'dispute, in relation to the interests of the pharmaceutical industry,” says Lucas Ariel, founder of Mirscience Therapeutics, a startup that develops new drugs and therapies for diseases that impact longevity.
How did we arrive at this scenario? It was because of the form How did the industry develop in the country and because there is no such strong need for innovation from larger pharmaceutical companies - as explained in excerpts above.
Among the possible most practical measures to reduce market bottlenecks, Penna suggests “a special tax regime for startups, focusing on radical innovation in the area of therapeutics, to facilitate the arrival of inputs from Brazil, without the very high tax”.
Another measure could be to reduce red tape to allow for changes to take place. The creation of integration programs between consolidated pharmaceutical companies and startups, for example, could facilitate the acquisition of Grants (non-refundable investment) or non-refundable loans, in order to meet the needs of the industry with greater efficiency.
“As difficult as it is, Brazil has enormous potential. We have companies doing very interesting things in this area of therapies, not many, but some early-stage startups. [...] There are also a lot of interesting things that are created within universities, but that end up not being transformed into a product, or being effectively explored, precisely because of this lack of alignment, but the human resources here are incredible. Large universities in Brazil generate highly relevant researchers who, in many cases, have to seek opportunities abroad,” concludes Pedro Penna, from NAIAD Drug Design.
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