As with all fields, biopharma goes through its share of trends and fads, and investors who can position themselves properly ahead of time tend to make the most money. But, as is true with all hype cycles, many opportunities carry a significant amount of risk, and there are bound to be a few duds mixed in with the winners.
Let's explore each of the most important biopharma trends of the coming year -- starting with the most investable, and ending with the riskiest -- so that you'll know where to look for opportunities that are right for you.
NYSE: NVO
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1. The GLP-1RA gold rush
When it comes to common afflictions in the U.S., there aren't too many that are more prevalent than being overweight. Similarly, diabetes is a major population-level burden, with nearly 12% of Americans affected.
And that's why a class of drugs called glucagon-like peptide-1 receptor agonists (GLP-1RAs) is raking in billions and billions of dollars in sales, with many more billions on the way in 2024 and beyond.
You have doubtlessly heard of the GLP-1RA drugs made by Novo Nordisk (NVO 1.11%) like Ozempic and Wegovy, which are based on the same molecule and are approved to treat type 2 diabetes and obesity, respectively.
Eli Lilly (LLY +2.55%) also makes a pair of newer GLP-1RA medicines called Mounjaro and Zepbound, which are also two different formulations of the same drug. According to Global Market Insights, the market for those medicines was worth more than $22 billion in 2022, and it's expected to grow to roughly $56 billion by 2032.
So there's a massive incentive for drug developers to try to commercialize new products in the segment, and over time these therapies are certainly going to help a lot more people than they do today. Biotechs like Structure Therapeutics are scrambling to get their mid-stage candidates through their clinical trials and out the door, as are many others.
For the moment, demand is so hot that neither Novo Nordisk nor Eli Lilly can manufacture enough of their candidates to capture all of their addressable market. Both businesses are investing billions in scaling up their output.
At the same time, there's a flurry of research activity documenting the possible future uses of the GLP-1RAs outside of diabetes and obesity in highly lucrative indications like reducing heart disease risk and even treating addiction. So if you're wondering whether it's too late to invest in one of the relevant companies, the answer is a definitive no.
2. A Cambrian explosion of antibody-drug conjugates
Roughly 550 million years ago, in what's known in natural history as the Cambrian explosion, the then-primitive multicellular life forms in Earth's oceans experienced an unprecedented period of diversification and increasing complexity that saw the first iterations of some of the aquatic invertebrate animals we still see today.
Right now, we're seeing a sort of Cambrian explosion in drug development. One promising class of medicines -- called antibody-drug conjugates (ADCs) -- is seeing dramatically increased diversity, complexity, and interest from major drugmakers. ADCs have been around for a couple of decades already, and there are at least 14 of them approved for sale, each of which treats various cancers.
NYSE: PFE
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Last year, 57 new ADC programs entered phase 1 trials, 90% more than in 2021. This year, Pfizer (PFE +1.34%), AstraZeneca (AZN +0.00%), AbbVie, Merck, and Bristol Myers Squibb have all made major acquisitions intended to bolster their ADC pipelines with deal sizes ranging in the tens of millions of dollars to the tens of billions. Markets and Markets, a research group, estimates that the market for the medicines will reach $20 billion by 2028.
ADCs aren't going away, and in 2024 it's highly likely that there will be a lot more business development activity in the space, not to mention an abundance of experimentation with variations on the modality. If you're curious about making an investment, there's more than one good option to choose from, so dig in.
3. The rise of artificial intelligence-driven drug discovery
Artificial intelligence (AI) is one of the most-discussed trends of 2023, and in 2024, that's practically guaranteed to continue, especially in the arena of AI-driven drug development. Companies like Recursion Pharmaceuticals (RXRX +5.00%), Schrodinger (SDGR +2.32%) and even Nvidia are positioning themselves as valuable collaborators to pharma businesses that need to find quality leads for new therapy programs.
NASDAQ: RXRX
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The idea is that by using AI to churn through vast quantities of data describing molecular interactions, disease pathology, and genomics, among many other data sources, it should be possible to identify approaches for new medicines that are more likely to succeed in clinical trials than with other drug discovery methods. At best, using AI in that capacity could slash development costs, reduce failure rates, and even shrink timelines from discovery to approval and commercialization.
So far, while interest in the segment is high, there aren't any actual case studies of successes or proof that the entire endeavor is worthwhile. But that will likely come with time. Invest with care, as the field is still in its speculative days.
