The ability to transform genomic information into effective diagnostics and therapies might represent the future of medicine. This potential is inspiring a new era of deal-making among biopharmaceutical and genomics companies that want to achieve a leadership position in next-generation therapies.
Within the next 12-18 months, 85 percent of global life sciences firms expect to leverage genomics data—either purchased data or through partnerships, according to Deloitte’s 2018 Real World Evidence (RWE) survey.
The global market for genomics is estimated to be worth about $17 billion. Based on our analysis of market data, we expect to see 14 percent annual growth over the next several years. The field of genomics is a significant disruptive force that could redefine health care, and we are only beginning to tap its potential.
Consider this: To date, about 90 percent of clinical studies have focused on 2,000 genes—just 10 percent of the whole genome.1 Why is that? Rather than exploring the unknown, researchers generally prefer to concentrate on genes that are already being studied extensively. Federal funding dedicated to exploring the lesser known parts of the genome could push researchers to expand their focus.
Deals and alliances are likely to accelerate
Over the past five years, we have seen about $40 billion in deals between biopharmaceutical companies and genetic testing and diagnostic firms. Of the more than 1,200 licensing agreements we know about, over 40 percent of the companies involved have multiple alliances. According to Deloitte research, over 60 percent of these deals were inked in the pre-clinical phase. This indicates a strong willingness among companies to harness this disruptive force and get ahead of their competitors with early-stage breakthrough technologies.
Here are some of the segments where we expect to see acquisitions and alliances dominate:
- Direct-to-consumer (DTC) genetic testing: The DTC segment is experiencing rapid growth due to improved accessibility and the falling cost of testing. Many biopharmaceutical companies are expected to partner with DTC genetic-testing firms to gain access to genotypic and phenotypic data that could be leveraged to design better clinical trials and to develop precision medicine. In July, GlaxoSmithKline (GSK) announced it had entered into a four-year collaboration with the consumer genetics and research firm, 23andMe, Inc. According to a statement, the deal will “focus on research and development of innovative new medicines and potential cures, using human genetics as the basis for discovery.”2 Additionally, GSK also made a $300 million equity investment in 23andMe.
- Cancer diagnostics and therapy: Oncology is seen as an important therapeutic focus for genomics companies that are investing in monoclonal antibodies and gene therapy. According to the results of our RWE survey, a majority of biopharma companies that are either using, or expect to use, genomic-linked data ranked oncology being a top priority for RWE initiatives. As cancer treatment transitions from pathology to immunology, biopharma and medtech companies are expected to pursue more deals in gene therapy and companion diagnostics. The potential for disruptive plays within oncology are immense. For example, improvements in sequencing technology could make asymptomatic cancer detection possible. Enhanced gene-editing capabilities could lead to allogeneic (off the shelf) Chimeric Antigen Receptor T-cell therapy (CAR-T). The existing treatment for CAR-T uses a patient’s own T cells, which are extracted, cryopreserved, transported and modified before being returned back to the patient through infusion.
- Bioinformatics: This relies heavily on the ability to mine mountains of genomic data. This means cloud-based storage and higher computing capabilities could help drive new relationships between life sciences companies and technology firms. We expect that sequencing companies will continue to acquire bioinformatics firms in hopes of unraveling more information about certain genes and how they relate to specific diseases and treatments.
- Gene editing: The development of CRISPR (Clustered Regularly Interspaced Short Palindromic Repeats) has dramatically influenced the art of gene editing. This technology allows undesirable traits to be deleted while potentially adding desirable traits. It provides a highly efficient and customizable alternative to other existing gene editing tools. However, the technology is relatively new, and biopharmaceutical companies might want to hedge their bets by establishing licensing agreements across different gene-editing platforms.
Can genomics go mainstream?
The whole human genome was sequenced 15 years ago after more than a decade of research and at a cost of about $2.7 billion.3 A patient’s DNA can now be sequenced for a few hundred dollars in about a day. DNA determines each person’s heritage and unique characteristics, but it also can help identify a predisposition to certain diseases. Moreover, sequencing the genomes of multiple patients can provide researchers with a better understanding of diseases, which can help pharmaceutical manufacturers develop more effective personalized therapies. However, life sciences companies might need to navigate around several potential pitfalls:
- Cost of bioinformatics: Genetic information could help biopharmaceutical companies accelerate drug discovery and development, and allow them to transition from one-size-fits-all therapies to personalized medicine. The cost of genetic sequencing has plummeted over the past few years, which has made it a more attractive investment area for many biopharmaceutical companies. However, as sequencing costs have declined, the bioinformatics software needed to interpret the data remains expensive. As a result, the total cost of genome-knowledge gathering has not declined significantly. To further reduce overall genomic costs, many technology organizations are partnering with life sciences companies by offering cloud-based solutions as well as developing platforms that incorporate artificial intelligence and machine learning to support genomics data mining.
- Interpretation of genetic testing data: DTC genetic testing has become widely available and is gaining acceptance among consumers, according to the results of a new survey of health care consumers conducted by the Deloitte Center for Health Solutions. About 45 percent of surveyed consumers said they would consider an at-home genetic test to identify existing or future health risks. Consumer interest in clinical, wellness, and lifestyle is fueling growth of DTC companies. However, patients and physicians might not be prepared to interpret the data generated by genetic testing, according to a recent study.4
- Reimbursement landscape: There could be some challenges ahead when it comes to reimbursement for genetic testing and personalized medicine. Health plans often are not quite sure how to determine when a genetic test is appropriate, or whether it is scientifically valid. While more than 70,000 genetics tests are available, there are only about 200 related CPT codes. A pharmaceutical manufacturer might have more success with a therapy if it can demonstrate its effectiveness for certain patients based on their genetic make-up.
- Regulatory approval: Getting regulatory approval for genetic tests and therapies could be another challenging area. The National Human Genome Research Institute5 states that “two federal agencies have the primary authority to regulate genetic tests – the Food and Drug Administration (FDA) and the Centers for Medicare and Medicaid Services (CMS). The FDA considers genetic tests to be a special type of medical device, and therefore these diagnostic tools fall within FDA’s regulatory purview. Until recent years, FDA chose to apply “enforcement discretion” to the vast majority of genetic tests – in this scenario, FDA has the authority to regulate tests but chooses not to. A test may be marketed as a commercial test kit, a group of reagents used in the processing of genetic samples that are packaged together and sold to multiple labs. Test kit manufacturers must receive approval from FDA before selling their products on the market. More commonly, a test comes to market as a laboratory-developed test (LDT), where the test is developed and performed by a single laboratory, and where specimen samples are sent to that laboratory to be tested. To date, FDA has practiced “enforcement discretion” for LDTs. This means that LDTs are being used in the clinic without the FDA’s assessment of their analytical and clinical validity. Moreover, CMS implements regulations to control the analytical validity of clinical genetic tests but not their clinical validity.” Given the exponential growth of DTC testing as well as clinical genetic testing, the FDA has drafted new guidance to describe how it intends to regulate genetic tests and verify their analytical and clinical validity.
Biopharma and other life sciences companies are analyzing the growth potential of genomics and are exploring how to effectively leverage genotypic and phenotypic data to establish a strong foothold in next-generation therapies.
Advances in genomic sequencing could make it possible to use a blood test to identify traces of cancer DNA and the genetic mutations that cause it. A gene-editing platform could be used to reprogram the patient’s immune system to identify these mutations and attack the cancer cells. Alternatively, epigenetics, the study of how genes switch on or off based on outside influences, could be leveraged to transform the cancer cells back to normal. While this might sound futuristic, we are getting closer to this reality.
Companies should determine if they are prepared for a future where their therapeutic solutions could be leap-frogged by fast-moving technologies from competitors, or from companies that currently reside outside the health care ecosystem. Over the past few years, more than 250 startups, with a focus on gene-based therapeutic solutions, have emerged.6 This increasingly crowded landscape has led to more incremental investments distributed across the different genomics players, rather than bold plays within specific sectors. Based on the level of investment we’re seeing, we think the industry as a whole should accelerate deal-making in genomics.
1 New York Times, September 9, 2018 (“https://www.nytimes.com/2018/09/18/science/why-your-dna-is-still-uncharted-territory.html)
2 GSK press release, July 25, 2018 (https://www.gsk.com/en-gb/media/press-releases/gsk-and-23andme-sign-agreement-to-leverage-genetic-insights-for-the-development-of-novel-medicines/)
3 National Human Genome Research Institute (https://www.genome.gov/11006943/human-genome-project-completion-frequently-asked-questions)
4 Annals of Internal Medicine, February 29, 2016 (http://www.genomes2people.org/wp-content/uploads/2016/02/Van-Der-Wouden-et-al-2016.pdf)
5 National Human Genome Research Institute (https://www.genome.gov/10002335/regulation-of-genetic-tests/)
6 Crunchbase (https://www.crunchbase.com/hub/genetics-startups)