So with that said, I'm going to introduce the first panel, which is entitled "The State of Biopharma: Bold Bets, Big Shifts, and What Lies Ahead." The panel will be chaired by Daphne Zohar, and Daphne will introduce the panelists, but I'll just introduce Daphne very quickly. For those of you who have been coming here for years, Daphne doesn't need an introduction because she's been a staple at USAIC. She's the founder and chief executive officer of Seaport Therapeutics, which I understand has a big event coming up, which maybe she'll tell us about. And Daphne's CV is just too long to go through. She's just been an incredible, very successful entrepreneur and the perfect person to moderate this first panel. So, Daphne, I'll invite you up to the stage.
Thanks. Thanks so much, Andy. And I broke my leg. It's a fracture. My son says I exaggerate, but a drunk driver hit me. So anyway, I'm a little awkward and clunky, but I'm very happy to be here with all of you today.
And I'm excited to talk about the industry and the state of the industry with some very distinguished colleagues. So I'm not sure if you're going to come up when I say your names, but of course we have the man of the day, Elias. Everybody knows he is currently vice chairman and president of Opco Health.
And then Chris Viehbacher, president and CEO at Biogen. Again, everybody knows him.
And then Hari Bhartia, who is the founder and co-chairman of Jubilant Bhartia Group, and also very well known. So today we're going to talk about the state of biopharma: bold bets, big shifts, and what lies ahead.
So Andy started off by saying how difficult it is. I don't know, I'm feeling more optimistic. I think that there are some really interesting tailwinds, and there's also been a lot of churn, a lot of regulatory headwinds, but it feels like things are more optimistic, at least on the part of smaller biotechs. So I'm curious to hear from my colleagues. I have some slides that I was going to share that gives a snapshot of the state of the industry right now. If we can put those up.
Oh, they're up. Okay.
Okay, so the first slide basically is showing that there's a record count of M&A deals above a billion dollars. So this is actually an all-time record. And the reason I point out this point is that M&A is really the lifeblood of our industry. So it enables capital to get recycled so we can then invest it in new medicines. It enables people who have then benefited from M&A to come back and start their next company. And it's been a big driver. I have to say that one of the things that we've seen recently is smaller biotechs actually commercializing drugs, and I really want to hear from my colleagues about that, and I think that's changing some of the landscape.
The second point is that there's a huge patent cliff, and if you look at it, about 40% of big pharma revenues face patent expiration over the next five years. So I want to start by asking, what do you think this means for the biotech sector?
Well, I think as you think about the evolution of our industry and our field of science, you can't but feel that this is truly, truly a time of tectonic shifts. You know, tectonic shifts is when you have an earthquake, and the earthquake didn't happen overnight. It happened because of tensions over many, many years, and I think we felt these tensions over many years. I mean, Chris and I, when we were at Sanofi, we had Chinese operations, and you could tell at the time that China was rising, but not rising that fast. It was not innovative. There was a lot of... Today the world has changed. It's almost like an earthquake that happened over the past two, three years. And I think, you know, Andy said it. I mean, our science is global, and science is a global language. And I think that what is happening is that the epicenter is actually changing, right? I think if you look carefully and you look at what I look at, you know, with PhRMA policy, in 2000 we spent $700 billion in R&D worldwide, right? In 2000. In 2020 it was $2 trillion.
And if you look at where is the $2 trillion, 42% of R&D funding today in the world is in Asia. So if you look at China and South Korea and Japan, it's 42%. 27% in the US, 22% in Europe. Right? So you can see how our industry has shifted. That's money. Right? And I think you mentioned that today, if you look at the transactions, there were no real significant transactions with Chinese companies 10, 15 years ago. Today, 30% of transactions are with Chinese companies. You go to Washington and if you talk to the legislators and you say, what's your number one issue? Oh, competitiveness with China across the board. Right? So I think that is a fundamental earthquake that has happened and shifted the tectonic plates in a way that we need to adapt to. And I tell you something, you know, Gary, my partner is here. We started first and foremost to do our first FDA approval here in the US, and we learned very quickly that we need to move out of there. And so our second one was in Australia, third one in Australia, fourth one is going to be in China. Why? Because if you look at the purchasing power parity, what you can get in terms of time, less time, less money, quicker to the clinic, you can have your proof of concept much faster. So there's not just an amount of money change, it's also how to do R&D and how to progress our companies.
So I think that's one thing that no one can really forget, that today your supply chain, intellectual supply chain, financial supply chain, performance supply chain is going to be disrupted, and we need to adapt to that.
Yeah. I'm curious to hear from you, Chris, on the point of China that Elias just brought up. How much of an overhang is China and their ability to move so quickly? How much is that an overhang to smaller biotechs in our innovation ecosystem?
Well, yeah, good morning everybody. Well, first, I would say, you know, if we step back a minute, we're in a disruptive industry, and we're also a very much disrupted industry. You know, when I started in this industry in Germany over 35 years ago, Europe was spending more money than the US on R&D, and then there was the rise of the United States. And I think, you know, what we're seeing today with China is a little what Europe faced, you know, 25 years ago. But, you know, even through, say, 2000 to 2010, you know, most of our industry was small molecule-based, and I can remember it was a seminal moment when the market cap of Amgen overtook that of BMS, for example. So, you know, this is an industry where we have to reinvent ourselves anyway every 12 years or so.
And so I think what's happening with China is not dissimilar to what we've seen in the past. And I think one of the things that is remarkable about our industry is what kind of resilience that we've actually seen over time. And I think we will get through that with China today. And I think it's what Andy said, you know, we're not going to slow down China. China is spending a lot of money. I think Elias would say, though, I'm not sure how much yet really breakthrough innovation is happening in China. But if you want to get a little better molecule versus what we've got here, you know, there's certainly plenty to choose from. I think we are going to have to think a lot about the competitiveness of the United States. You know, when you look at where we have been, I think we have become comfortable. You know, we have been top dogs now for quite some time, and I don't think we've been as competitive. If you look at getting clinical trials done, every hospital in China is all set up to go and do clinical trials. Here, yes, we have, for instance, you take IRBs. Well, there's a common master agreement, but, you know, the elite institutions saying, we don't have to follow that. We're Harvard, we're Stanford, we're Penn, right? And it can take six months just to get a... and to negotiate a trial. And then I think, you know, when you look at what's happening with NIH funding, and especially, you know, a lot of the elite institutions are being targeted, there's a lot of cost recovery comes through clinical trials. And I think we have to say, how do we get a whole lot better at operating clinical trials in the United States? Why is it that you can go to Australia and do your phase one, phase two a lot faster, cheaper than we can in the United States? So I think the real call to action is going to be our own ecosystem, because if we don't, you know, all of this research and development, it's like Andy said, right? Well, you know, hey, China's there, there's opportunity, capital will follow opportunity, and we will all end up doing stuff in China. Now, the market is not there yet. The market is here. But, you know, at some point, you know, we have to say, are we going to go the way of Europe or are we going to really compete? And I think that's the challenge. And that's one of the things that, you know, certainly when you start talking to governors in particular, they are very conscious of it. If you Google who's the biggest employer in the 50 states of the United States, there's about six states where it's either Walmart or Amazon. In every other state, it is the university health care system. So this is like the biggest employer. And those are the people who are really subject to competition. And so, you know, if we don't want to see those jobs lost, and remember, those are high-paying jobs where people coming out of our universities are going to find employment, you know, I think we have to wake up.
Yeah, I've been wondering a lot about the role of China in, you know, if you're a smaller biotech or even, you know, you're working for years and years on innovating, bringing forward a new medicine, and then a Chinese company can be a fast follower. And I was interested in this recent Revolution Medicines issue where apparently they were working with a contractor. I'm not sure, I don't want to say who the contractor was, but it's a well-known Chinese contractor, and apparently there was some IP that was then transferred to another company who went faster. Their data wasn't great, so that's good. But this idea of China being a fast follower or me-too, I want to come back to you, Hari, in a moment about the role of India and places like Australia, but I'm going to go to you, Elias. You said something interesting in our pre-con conversation about the fact that China is no longer just a fast follower, me-too. Talk a little bit about the role of innovation.
Well, look at what it's done. I mean, look at the publications. You know, today, if you look at the budget in China in nominal terms, it's 20% less than the US, but in purchasing power, it's actually superior. It's crossed this year. So power-wise, they're there. Second, they're making a mistake, and China is not all perfect. They invest a lot less in basic research, right? And that's a mistake because we actually get our science and our discoveries to feed the engine. They haven't done that. But there is this osmosis between folks who trained here, went back there, you know, with the Thousand Talents program and so on. And look at the publications. I mean, I know George is here. He's very fond of the gene therapy for the hearing. Well, there are two companies in China who came up with that too. And then you look at CAR-T cells. You know, oh, my God, in vivo CAR-T is complicated. Well, they're there, and it's not just one or two companies. It's really many. So I think you're seeing the emergence, and they understand that, in fact, if they don't go into the innovation, they won't survive because you can do fast follow and so on, but it gives you a market advantage a short time. The second thing that the Chinese are not doing right is they're not encouraging innovation from their market decisions. So the pricing, the recovery of your innovation in China is very, very unlikely because it's one-tenth of the price of a drug here. So you can see that if I'm going to develop a brand drug with all the investment that you need to do for a global market, well, your home market is not supporting you. And so that's why you're seeing a lot of transactions. That's the second strategic mistake they make. But don't be fooled. There is original innovation emerging. You can't not do that because they have, you know, the US has about two and a half, three million scientists and engineers because we are 350 million people. But if you look at 14 million in China and the same in India, by the way, a little less, but it's really power. And the power comes from the brain, and the brain is the one that generates the novel ideas. And there's nothing that will tell you that they cannot do that. They have for 5,000 years. So it's really a civilization that is reemerging, and we just need to basically, in my view, not look at them as enemies, but as adjuncts to what we want to do.
Yeah. And Hari, you've been a very big innovator in India, and there's so much going on there, and it's, I think, very promising. Can you talk a little bit about how India plays a role in this ecosystem right now?
Before I mention about India in comparison to China, I just want to give you my experience of China. You know, I visited China almost 23 years back, and I was amazed to see how strategically they were trying to build knowledge in our ecosystem in innovation. They had given market access to all large pharma companies, and they had asked them to build their R&D centers there. So, Elias, I don't know whether you'll remember, many big pharma set up their big R&D centers there, and that was the first step of training. And I visited a township which was created by one of the biggest outsourcing companies today from China. The whole thing was set up, utilized maybe 5%, but state-funded. So that's the approach. It's a top-down approach to strategically build capability. And, of course, they did massive reforms on the regulatory side. Then they brought talent in from the US, not only young scientists, but also people who were experts in licensing or partnerships so that they could then market to the Western companies. And, of course, government funding coming to India. I think the ecosystem in early-stage drug discovery is we have some seven or maybe 20 companies, seven large and another 13, 14 companies who are doing early-stage drug discovery. And companies, one of my companies works with almost 10 venture capitalists helping them form new companies. We do everything. We do everything completely, discover, give a candidate to them, pre-IND, and so that. And today, government has also started funding, seed funding biotech. So we have almost 10,000 biotechs in the ecosystem there. So, and as you know, the Indian scientists work here in the US in almost all the pharma companies. They have gone back in our companies. Almost all the top scientists have experience in working in the US, and they have come back to India. The only challenge that India faces is we have not done massive reforms in our clinical system, you know, and that's where the challenge lies. Companies get stuck when it comes there. But if you are an inventor of a drug in India, you can get a phase one, first-in-man approval for trials. But otherwise, you get stuck. There's delay. It takes about 12 months. Though they say it's 60 days, but it takes 12 months. So I think that's where the major reform has to happen, and also align the hospital system for clinical trials.
Yes. And so there are some themes that I think come back to some of the points that Chris and I were making around speed and FDA. So I want to move to regulatory because FDA has been giving lip service to this idea of speed to one registration, enabling study being sufficient for approval, moving quickly to the clinic. And what do you guys think about, you know, when is that going to translate into reality? Chris, I know you spend a lot of time in DC and would like to hear a little bit about that, and then open it up to the rest of the panel.
He looks at FDA with an eagle eye. So I'll let Chris comment, then I'll complete this.
Yeah. I mean, I think if you listen to the FDA commissioner, it's all good, right? We're going to use a lot more real-world evidence. We're going to use AI to speed up review of dossiers. One pivotal clinical trial will be all that's needed. Loves the idea of digital twins and things like that. And of course, that's not necessarily the reality we see on the ground. Although the one thing that has occurred is this priority voucher, and now, you know, that's probably squeezing out some other companies as resources got pulled on to do that priority voucher. They have introduced AI. I think the thing that you see in these, you know, the people who've come into the administration is that they're largely academics and not managers, and these are big, vast organizations, whether it's the NIH or CDER or it's the CDC, and it's not so simple as snapping your fingers and stuff happens. You've got culture, you've got process, you've got organizational structures, and a lot of the people who could make things happen have left. So I think, you know, it remains to be seen. I think it is one of the things that we're going to have to make happen. You know, I think institutions like the NIH, and I think Elias would agree with that, and the FDA do need some level of reform. I mean, if you look at how we do clinical trials, we haven't really had any major innovation in 50 years. The stuff we do in clinical trials is pretty innovative, but, you know, it took us forever even to get rid of paper in the whole clinical trial process, and we should be using things like digital twins, and we should be a lot more advanced on using biomarkers and different clinical trial designs. What we're going to need is somebody who can actually make things happen, but at least there is the dialogue around that, which, you know, we didn't have. So I think, you know, I'm kind of hopeful that we will move, but it'll have to be, I think, under the threat of the competition again from China, because this is where China is going much faster, and it is always a little challenging for the FDA because every time they try to speed it up, you've got Public Citizen on their back immediately that they're watering down initiatives. So there's going to have to also be a public education that you can actually get to the same level of validation and safety for a new drug without necessarily taking a whole year. When I started in this industry, FDA was taking four years to develop a drug, and it was really HIV coming along and people saying this is inexcusable that it's taking four years, and now we got it down to a year. And that has been in place for at least 20 years. So we should be able to do this in the space of, you know, maximum three to six months.
Yeah. It's interesting. We have so much bureaucracy on the one side, and then we have Joe Rogan texting Trump to get some psychedelics.
It's more than bureaucracy. It's lack of imagination, really, because when I was the NIH director, we talked about cancer at the time, and we said, how can we accelerate that? Well, it turns out that the only way you accelerate is by doing early experiments in humans, right? So there is a work that we did with Mark Melnick at the time, and then Andy von Eschenbach, myself, called phase zero trials. I don't know if anybody has heard of phase zero trials. It's a 20-year story. And then we had guidelines that came out about 2006 saying if you have the biomarkers, you can go at a much lower dose, read out the effect of the drug, and you can see if you have a drug, and you can do this in a phase zero concept. Right? Well, the ayatollahs at the FDA say, oh, no, no, no, no, we're not doing that. And so they killed it. And the reason they killed it is because they don't have a frame of advancing with science. No, what their framework is, we have a system, you fit in. Okay. So what happened in Australia and China that's different? First of all, the phase zero idea is what they really took. And the way they took it is by saying we're not all-knowing. We're not God. We are not the ones who say, you don't do it, you wait for my permission, three months to get a meeting, three months to get an answer. No. What they say is, wait a minute, science is done by scientists and physicians. So in Australia, when you go to Australia, the regulator says, look, I'm not knowledgeable. Talk to the KOLs and the people in Australia who know best about your field. Present what you're saying. Look, if the IRB is going to accept you doing the early trials at their institution, and that conversation, it's almost like an investigator-initiated dialogue, right? It's doctor-scientist to doctor and scientist, and then the agency only looks at your tox package, your safety package, and so on. Same thing in China. China copied Australia. They are, you go there, we have a team now in China, they're meeting with KOLs. So the problem is that, and I met the FDA commissioner, he's a great guy. He's a surgeon at Hopkins, and I wish he would, like, you know, cut the agency, you know, and really change it and frame it differently. So it's a mental frame block that we're facing, in my view, which we need to overcome with all the things that, you know, PDUFA and all of those things that you guys do at pharma. But I don't think it's going to improve. And, you know, when you talk to them, they say, oh, well, the problem is the IRBs, they're not centralized IRBs, so any trial takes forever. Second problem, contracting with sites, because every contract is a different Hopkins and all these things. Third, recruitment and so on. So they're tactical. They're not strategic changes. That's what I think should happen.
Yeah. 2006 and do what we said in 2006.
Yeah. It's amazing, though, that you came up with this concept and it still hasn't been implemented. So that's, I think, a problem. One thing that has been implemented and has had an impact is manufacturing and the focus on manufacturing and some of the MFN initiatives. Do you guys want to talk about that? Hari, if you have any thoughts on that.
Hari.
Well, I mean, yeah, I mean, again, I think if we actually look at ourselves in the mirror, you know, it's not unreasonable what is actually being asked of us, right? We make almost all of our profit in the United States, and yet we manufacture things in countries that don't want to reimburse our medicines, that value a return on investment for research and development. And, you know, I think it's not unreasonable for the American public. You know, we talk about the Trump administration, but, you know, the Trump administration only got there because there was a level of dissatisfaction in society more broadly, right? It's the same thing even on MFN. And, you know, we have taken an economically rational approach even to pricing, right? Our business is a little like airlines, right? If the plane flies from Boston to San Francisco and it has a full load of passengers or it flies empty, it's almost the same cost, right? And we're a little like that, except instead of the airplane cost, it's R&D. And once, you know, we've had first class paid for by the United States and Japan, maybe Germany, then every other country we add brings a marginal profit on that R&D. So it's actually a logical economic thing. But from a societal point of view, there is sort of this outrage about, well, why do we have to pay so much more versus, say, the United Kingdom? And, you know, you've got this Arnold Foundation running ads saying, you know, these GLP-1s cost $750 in the United States and $75 in the UK. And so I think we lost sight of the contract we have with society, and now we're bringing back the manufacturing. They're using tariffs, obviously, as the lever for that. But I have to say it's not something I think personally I think we should be fighting. I think it makes sense. If this is our most valuable market, this is where we should really be also doing our investment. And on the pricing, you know, let's face it, the soft target has always been our industry. If you're in Europe and you have government-funded health care, you've got 0% GDP growth, but your health care costs are growing at 6-7% because you've got an aging population. You know, somewhere the numbers are not going to add up. Well, do you want to take it out of the pockets of doctors or people who work in hospitals who also vote, or do you want to take it out of nasty multinational corporations? And, you know, I think this is where we have tried to fight that. But I think now with MFN, we have a little bit more legitimacy and a little bit more leverage to try to change that. But I don't think it's going to change dramatically. Europe doesn't have the money. I think what we're going to see is that Europe is going to just become a lot more selective. It will have to pay a close-to-US price for those medicines it can't do without, and it probably decreases the actual number. Even today, 50% of medicines approved by the EMA are not available in all 27 markets. And I think it's only about two-thirds of medicines that actually get into a meaningful number of the 27 EU countries. So, you know, I think MFN is actually helping us on some fronts, but it's certainly going to diminish the value of the European market for us.
