Metabolic medicines dominated life sciences headlines in 2024, a trend expected to continue into the new year. Other things to look for include more widespread adoption of artificial intelligence technologies and the IPO market\u2019s return to normal levels.
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A case can be made that metabolic medicine was the theme of the life sciences industry in 2024. Insatiable market demand fueled rocketing revenue growth for Novo Nordisk, which makes Wegovy, and Eli Lilly, maker of Zepbound. This commercial success is paving the way for metabolic drug research more broadly, as would-be contenders aim to develop new and better products for weight loss.<\/p>\n
While this space has become active and crowded, not so long ago, obesity drugs were a research desert. Omar Khalil, managing director of Sante Ventures, remembers those days.<\/p>\n
\u201cFive years ago, you couldn\u2019t get a meeting with a [venture capitalist] if you said you were developing a drug for weight loss,\u201d he said. \u201cIt was a space that investors did not want to touch, given the failures and the challenges with getting drugs approved. With the success of Novo and Lily getting their drugs approved, that\u2019s obviously changed drastically.\u201d<\/p>\n
Not surprisingly, there\u2019s enough momentum in metabolic medicines to carry over into 2025. The class of expensive GLP-1 drugs touches on broader themes that will affect the life sciences in the coming year, such as drug pricing and regulation.<\/p>\n
Deloitte\u2019s survey of 150 C-suite executives for its 2025 Life Sciences Outlook report<\/a> shows that pricing and access to drugs and medical devices is the most significant issue: 47% expect pricing and access to significantly affect their strategies while 49% expect a moderate impact.<\/p>\n What\u2019s Ahead in Drug Pricing<\/strong><\/p>\n The Centers for Medicare and Medicaid Services has already selected the first 10 drugs for the negotiation program established by the Inflation Reduction Act (IRA)<\/a>. Those prices won\u2019t take effect until 2026. In 2025, up to 15 more drugs under Medicare Part D will be selected for the negotiation program. Novo Nordisk\u2019s Wegovy and Lilly\u2019s Zepbound won\u2019t be covered by these negotiations. But they could still come under CMS\u2019s purview under a policy change proposed by the Biden administration.<\/p>\n Federal law does not permit Medicare to cover obesity drugs. But the Biden administration has proposed reinterpreting the law, classifying GLP-1s as chronic disease medicines rather than obesity drugs. It\u2019s unclear what the Trump administration will do. Robert F. Kennedy Jr., Trump\u2019s pick to lead the Department of Health and Human Services, opposes such drugs. But Elon Musk, who is leading the Department of Government Efficiency, has expressed support for obesity drugs as a way to lower healthcare costs.<\/p>\n In a Dec. 5 online media briefing after the Citi Global Healthcare Conference, Citi analyst Geoff Meacham said one looming drug price question is whether Trump adopts most favored nation pricing, a policy proposed in his first term that would cap Medicare drug prices at the levels paid by other countries. He added that he does not think a repeal of the IRA is in the cards.<\/p>\n As for Trump\u2019s unconventional nominees, Meacham didn\u2019t think that Mehmet Oz leading the Centers for Medicare and Medicaid Services and Martin Markary at the FDA would be very controversial or unsettling. But the selection of RFK for HHS raises uncertainty, he noted. Despite all the handwringing and fear, Meacham does not see radical changes brewing.<\/p>\n \u201cWe\u2019re not of the view from a policy perspective that drugs are going to be pulled from the market,\u201d he said. \u201cWe\u2019re not of the view that the drug review process will be changed.\u201d<\/p>\n Regulatory Outlook<\/strong><\/p>\n Deloitte said most some industry executives are bracing for business volatility. Some of that volatility could come from changes to how the FDA and CMS interpret laws due to the U.S. Supreme Court\u2019s overturning of the Chevron doctrine<\/a>, Deloitte said. Under this decades-old doctrine, in matters where a law was ambiguous, courts deferred to the expertise of federal agencies. Deloitte said it\u2019s unclear whether courts will continue to defer to government agencies for their statutory, scientific, and technical interpretations of laws.<\/p>\n To Khalil, the biggest regulatory concern to investors is anything that leads to less stability or predictability within the FDA.<\/p>\n \u201cIt\u2019s not so much whether it\u2019s less onerous or more onerous,\u201d Khalil said of regulation. \u201cIt\u2019s, is it less predictable? Is the path to approval something we can understand and underwrite? If it\u2019s less predictable, or if there\u2019s an exodus of FDA employees, or if review times are extended, those dynamics could certainly impact the biotech market and certainly reduce inflows into the market if people don\u2019t see a predictable path or a regulatory process that\u2019s well understood.\u201d<\/p>\n To the extent that there is political or regulatory uncertainty, it hasn\u2019t tamped down interest in metabolic disorder drugs. According to the Deloitte report, the success of GLP-1 obesity drugs have revitalized interest in general medicines \u2014 small molecule drugs that treat common conditions (Currently available GLP-1 medications are injectable peptides, not oral small molecules, but there are small molecules in various stages of development for obesity).<\/p>\n Deloitte notes that many companies are trying to capture a share of the $200 billion GLP-1 drug market. Beyond obesity, potential indications for these drugs include sleep apnea, addiction, Alzheimer\u2019s disease, and metabolic dysfunction-associated steatohepatitis (MASH). New medications for these disorders could have far-reaching effects by reducing demand for medical devices and surgical procedures related to diabetes and obesity, Deloitte said in its report.<\/p>\n Digital Transformation Led by AI<\/strong><\/p>\n Artificial intelligence is a big part of the digital transformation underway in the life sciences industry, according to Deloitte. Survey respondents said technologies employing generative AI are enhancing products, services, operations, and strategic decision making. About 60% of executives said they plan to increase investments in generative AI and\/or digital transformation. This suggests that companies are moving beyond initial pilot projects and beginning to realize substantial value from adopting these technologies at scale, according to Deloitte. The firm adds that generative AI in particular is seen as having more transformational potential than previous digital innovations because it can reduce R&D costs and streamline back-office operations, among other benefits.<\/p>\n The clinical trials sector is one area realizing the benefits of AI-driven technologies. By the end of 2025, AI will go from being used in certain situations to being a main component of clinical trial operations, contends Jeff Sidell, chief technology officer of Advarra, a clinical trials services and technology company. Generative AI already enables automation of labor-intensive tasks but there is also promise in predictive analytics to forecast outcomes, optimize allocation of resources, and streamline timelines, he said. These technologies can also be used to extract key information from documents, reducing manual entry errors.<\/p>\n \u201cAdditional use cases that will become more common this year include using AI to analyze past trials and recommend improvements based on data patterns,\u201d Sidwell said. \u201cSite selection will also benefit from AI by identifying optimal sites with a greatest likelihood for patient recruitment success, considering factors like demographics, past performance, and patient availability.\u201d<\/p>\n The Investment Outlook for 2025<\/strong><\/p>\n 2024 was a rebuilding year for the IPO market, according to Renaissance Capital. The IPO research firm counted 146 companies that went public across a range of industries. Those companies raised $29.6 billion, which was 50% more compared to the prior year. Even so, deal flow was slow as companies repeatedly pushed back IPO timelines amid uncertainty about interest rate cuts and other signs of economic volatility. Renaissance expects 2025 will be a better year for IPOs.<\/p>\n