Biotech for the next decade: Private market innovations

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2024-07-31
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The views expressed are those of the authors at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.

A new age of innovation is fueling breakthroughs across biotech, and we believe private companies are at the forefront of this progress. Immunomodulatory therapies, precision oncology, antibody drug conjugates (ADCs), radiopharmaceuticals, genetic medicines, and a range of other novel treatment modalities are poised to fundamentally change the standard of care for patients around the globe over the next decade. We believe that, amid widespread market volatility over the past 18 months, scientific advancements across private biotech continue unabated. In this piece, we share our views on some of the top innovations we’re tracking in the private biotech market.

Immunomodulatory therapies

Autoimmune and inflammatory diseases are key areas that we believe have plenty of unmet need and growth potential over the next decade. The unprecedented availability of private capital has enabled many private companies to be built around treatments for many patient indications in these areas. Targets that offer more specific immune modulation (and could therefore improve the risk/benefit profile) or more convenient routes of administration (through oral or extended activity formulations) are of particularly high interest to our team in the years ahead. 

Precision oncology 

Programs targeting specific tumor mutations have attracted a lot of capital over the past decade, but enthusiasm has been tempered by recent lukewarm launches, FDA scrutiny around the accelerated path to approval, and uncertainties around development after the Inflation Reduction Act. 

However, we continue to be impressed by the progression of the underlying science and higher-than-average odds of clinical success for such programs. Notably, we have become increasingly focused on targets that suggest high efficacy and low competition, as well as oncology indications where there is a high and undisputable unmet medical need. In our view, innovations with these characteristics are better positioned to navigate the evolving challenges in the precision oncology space.

Antibody drug conjugates

Unlike conventional chemotherapy treatments that are toxic to healthy cells, antibody drug conjugates deliver chemotherapy agents directly to cancer cells. This is made possible by a “linker” that attaches a toxin to a monoclonal antibody that then binds to a specific target expressed on a cancer cell. By binding to the target, the ADC is able to release the cytotoxic drug directly into the cancer cell and avoid harming healthy cells. 

The ADC modality has produced several important drugs of the past decade, and we are impressed with recent clinical updates in new cancer indications. The space continues to improve upon the safety and efficacy profile of ADC-based drugs (and the range of treatments that they may be able to offer) through progress in linker chemistry, conjugation technology, and payload (i.e., toxin) selection. We believe ADCs will solidify as a core treatment in the standard of care for many cancers, potentially across multiple lines of treatment given innovations in targeting and payload choices. 

Radiopharmaceuticals

Radiopharmaceuticals, or radioligand therapies, are another targeted form of cancer treatment that deliver radiation to specifically targeted cancer cells, with minimal effect on surrounding healthy tissue.  Momentum in the space has increased in recent years driven by encouraging clinical data and strong recent launches targeting neuroendocrine tumors and prostate cancer. In our view, this innovation, despite recent progress, is still in the early stages and the modality will continue to build on the precision oncology and ADC themes. 

Further, radiopharmaceuticals have historically been hampered by the complexity of their commercial execution, but we believe recent advances and a growing market infrastructure should help overcome these challenges and increase pharma interest in the space.

T-cell-based therapies

CAR T-cell-based therapies have dramatically changed the standard of care and prospects of patients who suffer from a variety of blood cancers. The next wave of innovation in this space could improve upon the complicated logistical challenges of existing autologous approaches (which use cells from the patient). Novel manufacturing technologies could significantly shrink the process timeline or enable an off-the-shelf, allogeneic approach (which would broaden the source of cells beyond the patient). 

Targeting solid tumors with these cellular therapies has proven to be challenging, and there is significant room for progress in this area. We are keeping an eye on novel CAR T-cell therapies that are armored with additional mechanisms that have the potential to survive the defenses of tumors in the tumor microenvironment. In our view, recent preliminary data from T-cell receptor (TCR)-targeting modalities — in both soluble (TCR engagers) and cell therapy (TCR-Ts) formats — combined with proof-of-concept clinical data from public companies working on this modality show encouraging progress. As we continue to explore the space, we are excited by second-generation products being built by multiple private companies focused on this innovation. 

Targeted protein degradation

Protein degradation, through either proteolysis-targeting chimeric technologies (PROTACs) or molecular glues, is an area of high activity in the private markets. Unlike traditional small-molecule inhibitors that require an accessible catalytic site to block the activity of a protein, degraders can leverage any binding pocket or, in some cases, no binding pockets at all. As such, the modality can target previously undruggable proteins. In particular, the PROTAC field has advanced tremendously in recent years. We are now exploring the nascent space of molecular glues, which could see its historically challenging drug design issues helped by new breakthroughs in the field. 

Genetic medicines 

  • Gene therapy, which aims to replace a defective gene with a functional copy, has had plenty of safety and regulatory ups and downs over the past two decades. Critically, however, a couple of high-profile recent and expected approvals have highlighted the progress gene therapy has made on both the clinical development and regulatory fronts. We see potential in current efforts directed at improving vector capacity, transgene expression, and tissue targeting, as well as at diminishing immunogenicity. 
  • Gene editing is a newer technology that seeks to remove or repair errors in a patient's genetic material — in other words, to directly correct the defective genes. If tractable, this is a more elegant approach than gene therapy, since it might allow structure and functional gene correction without significant disruption to genetic regulation or the overall cellular environment. It thus, theoretically, removes some of the risks of supra-physiological gene activity and mitigates durability risk. While several gene therapy treatments have been approved over the past few years, in vivo gene editing is still an emerging approach with only a handful of companies advancing clinical programs predicated upon this modality. Notably, multiple private companies are proposing new and improved mechanisms. We think the risk/ reward of the approach is sensible in the context of orphan diseases with genetically validated targets and are actively following the space. 

Bottom line on biotech innovation in private markets

Many of biotech’s most exciting advancements are on the cusp of markedly improving the standard of care for patients in numerous diseases. In our view, the private markets are driving innovation across modalities, and we expect both scientific and regulatory progress to persist in the next decade and beyond.

Experts

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