UK government plans to revamp holiday pay calculation for part-year workers
Out-Law Analysis | 27 Jan 2023 | 12:26 pm | 9 min. read
Diversification, collaboration and consolidation are likely to be emerging themes in the cell and gene therapies (CGTs) market globally in 2023 and beyond, as developers seek to make their businesses resilient to the economic headwinds they face.
While there is a healthy pipeline of cell and gene therapies (CGTs) under development across the US and Europe, gaining access to capital remains a challenge. Investors continue to be selective about the CGTs they back in the aftermath of turbulent financial market performance in 2022 and at a time when the cost of failed research and development (R&D) has been brought into sharp focus.
Even if companies receive capital to progress their R&D, there are other barriers to market access to overcome. Notably, these include regulatory requirements that perhaps do not best reflect the novel technologies and processes being implemented by the industry. The anticipated announcement of how EU pharmaceuticals legislation is to be reformed will be a major milestone this year and will shape how the market in Europe evolves in the next 10-20 years, while 2023 is expected to be a significant year of progress towards reform – and new opportunities for CGTs – in the UK.
Timothy Hunt, chief executive of the Alliance for Regenerative Medicine (ARM), struck an optimistic tone when he introduced ARM’s ‘state of the industry’ briefing on CGTs earlier this month in San Francisco on the sidelines of the annual JP Morgan Healthcare Conference & Biotech Showcase.
Hunt noted that 2022 was yet another year of significant scientific milestones with several products approved in the US, the EU or in other new markets, or for new indications. The world’s first ever allogeneic T cell therapy product (Ebvallo – Atara Biotherapeutics) was approved in the EU, which represents a major technological breakthrough. Looking forward into 2023, Hunt noted that prospects looked “brighter” with stakeholders continuing to work towards several other notable potential ‘firsts’: a doubling of the US regulatory approval pipeline, a first approval for a CRISPR-based gene editing therapy, and the first approval for an adoptive cell therapy for solid cancer.
The anticipated announcement of how EU pharmaceuticals legislation is to be reformed will be a major milestone this year and will shape how the European market for cell and gene therapies evolves in the next 10-20 years
The view from an investment perspective is mixed. While Hunt reflected on the fact that investment in the CGTs industry globally fell 44% in 2022 to $12.6 billion, he was at pains to frame this as a normalisation of the market following two exceptional years of investment in 2020 and 2021, when it hit $19.9bn and $22.7bn respectively. Investment recorded in 2018 and 2019 was $13.3bn and $9.8bn respectively.
Hunt acknowledged the tough market conditions, which contributed to a loss in the value of equity held in public CGT companies in 2022, and that accessing capital remains hard. However, he cited the strong pipeline of new products across the CGTs industry, with as many as 18 CGTs set for a regulatory decision in 2023. Cancer treatments are a heavy focus of much ongoing research, but the pipeline for 2023 also promises progress towards better treatment of sickle cell disease and haemophilia, among other rare diseases.
There are, however, major differences in the volume of CGT activity across different geographic markets. The US is where much of the innovation is focused: 14 of the 18 regulatory decisions Hunt highlighted are expected in the US, and 43% of active clinical trials of CGTs are in the US, compared with just 18% in Europe. Almost half of all CGT developers are based in North America too – 686 to Europe’s 244, with there being 1,457 developers in the industry globally according to ARM figures.
Hunt gave a sobering assessment of where ARM sees the European CGT market today. He said that while Europe has been a leader in CGT for decades, there is now “a flashing yellow light of caution for patient access”. Hunt cited “roadblocks in reimbursement” and the withdrawal from the market of seven advanced therapy medicinal products, adding that the fact that there were just three new ‘phase 1’ clinical trials for CGTs launched in Europe in 2022 was a sign of stagnation in the market.
Europe, though, as Hunt put it, has an opportunity “to seize a once-in-generation chance” to change the regulatory regime applicable to CGTs and ensure it best supports innovation in this industry in the years to come.
The EU’s general pharmaceutical legislation was the subject of a review by EU policymakers following publication of the European Commission’s pharmaceutical strategy in November 2020. The Commission said at the time that the aim of the review was to “ensure a future-proof and crisis-resistant medicines regulatory system”. The Commission was expected to outline a package of proposed reforms by the end of 2022, but the process was delayed.
A European Commission spokesperson told Pinsent Masons that reform of the pharmaceutical legislation is “a top Commission priority”. They said an “essential” internal quality review process concerning the legislation under consideration remains ongoing. However, they added that while the Commission “will always favour quality over speed, particularly for a proposal as significant and far-reaching for our patients and industry such as this one”, the proposal is “expected to be ready for adoption” in March this year.
One area that Hunt said the EU legislation could be improved to the benefit of CGT development is the exemption of advanced therapies and medicinal products (ATMPs), such as CGTs, from EU requirements that apply to genetically modified organisms (GMOs). ATMPs are currently treated as GMOs in the EU – ARM, together with the European Federation of Pharmaceutical Industries and Associations (EFPIA) and the European Association of Bioindustries (EuropaBio), have called for this to change.
Alongside the Commission’s evaluation of EU human medicines law are other parallel initiatives the Commission is overseeing, which concern more specific areas of the EU legal framework for pharmaceuticals. This includes its review of orphan and paediatric regulations, the review of the supplementary protection certificate (SPC) regulation and potential introduction of a unitary SPC and/or unified SPC grant mechanism, the review of the current EU procedure on compulsory licensing of patents for export to countries with public health problems. The Commission is expected to adopt its proposals in these areas in April.
The EU law making process only starts with the Commission’s proposals, however. Businesses can expect law makers at the European Parliament and Council of Ministers to take months – possibly years – scrutinising the proposals. Even when agreement is reached on the final wording of the legislative texts, there is likely to be a further implementation period before any new rules take effect.
As well as assessing the evolving regulatory landscape in the EU, many CGT developers will be monitoring for changes to the regulatory framework in the UK.
Much of the existing UK legal framework applicable to CGTs is derived from EU law, but significant divergence is anticipated as time passes post-Brexit. The UK government has signalled its intention to streamline regulation – its Retained EU Law (Revocation and Reform) Bill, currently before the UK parliament, provides for much of the EU legislation retained in UK law at the point of Brexit to be automatically repealed at the end of 2023 unless ministers decide to preserve or replace it beforehand. It remains to be seen what retained EU law relevant to CGTs is left on the UK statute book come 1 January 2024.
For multinational businesses operating in both the EU and UK, internal compliance programmes will need to align with the stricter of the two regimes, but the UK government is adamant that there are opportunities to position the UK as the go-to jurisdiction for developing new innovative technologies via regulatory reform, as it has done in the context of stem cell research and plant gene editing.
One area of UK reform that CGT developers will want to monitor closely in 2023 concerns clinical trials regulation. The UK clinical trials framework remains based on EU legislation that itself has been superseded by EU-level reforms since Brexit. It is outdated and in need of updating.
Last year, regulators proposed a new risk-based framework for clinical trials regulation in the UK, and it seems highly likely that there will be further progress towards reform this year. A particular proposal that CGT developers may welcome are plans to allow “‘non-interventional’ real world data collection”, without the need for clinical trial authorisation, in cases where the MHRA has already given approval to the use of unlicensed medicines.
Despite the widely acknowledged need for reform, the UK’s Cell and Gene Therapy Catapult has reported (15-page / 6.3MB PDF) that the number of ongoing UK clinical trials concerning CGTs rose to 178 in 2022, from 168 in 2021. The news that the first CAR-T cell therapy has also been approved for routine use on the NHS in England also sends a welcome signal to industry.
While much of the change industry wants to see is in the gift of policymakers and regulators, there are actions the CGT industry can take to improve the position in the short term – expert panellists at ARM’s ‘state of the industry’ briefing agreed there is a role for industry to educate regulators about the differences involved in developing and manufacturing CGTs compared to small molecule drugs.
The UK government is adamant that there are opportunities to position the UK as the go-to jurisdiction for developing new innovative technologies via regulatory reform, as it has done in the context of stem cell research and plant gene editing
Panellists said that the novel processes involved in developing CGTs also put a strong emphasis on carrying out risk assessments so that developers have contemporaneous records to be able to show regulators substantiating their decision-making processes.
Developers were also urged to consider how the manufacturing of CGTs will be scaled-up as the product is commercialised, as even small changes to manufacturing processes can cause delays in the regulatory approval process. In considering this issue, CGT developers will weigh up whether to invest in manufacturing skills and facilities in-house or use external specialist providers, known as contract development and manufacturing organisations (CDMOs).
Challenging economic conditions in 2022 had a negative impact on the value of public biotech companies and on private equity investment. At the ARM ‘state of the industry’ briefing, panellists reflected on the fact developers need funding not only for products that show promise in the early stages of development but for late-stage products too. They said that significant effort is being made to de-risk investment in late-stage products to ensure the products can be brought to market and that years of R&D is not wasted.
For all CGT developers, the challenge is convincing investors that the promise shown in R&D will evolve to something that is a viable product that can be commercialised successfully. As the CGT market grows and investors become more selective about the products and companies they align with, CGT developers need to in turn think carefully about how they build resilience into their business.
In 2023, we expect CGT developers to engage in intense strategy reviews as they consider new financing options, potential mergers, and other collaborations.
While some CGT developers will have a path to go things alone – as, at ARM’s event, Suma Krishnan, founder and chief operating officer of Krystal Biotech, explained was the case with her company – others will benefit from the scale and efficiencies on offer from partnering with major pharmaceutical companies. Pfizer’s $5.4bn acquisition of Global Blood Therapeutics, a company behind sickle cell treatments, and Roche’s collaboration with cell therapy business Poseida Therapeutics, which involved an upfront payment of $110m to Poseida, were among the deals announced last year.
Mergers and acquisitions may be a route other CGT developers pursue to diversify product portfolios amidst the challenging investment landscape and the risks of banking heavily on the success of one product.
Recent R&D failures show it is important to manage risks, particularly in the CGT space which involves the development of new treatments in a dynamic regulatory environment. For example, shares in VBL Therapeutics fell around 78% last summer in the aftermath of its announcement that a phase three clinical trial for a new gene therapy for ovarian cancer had failed, with reports at the time suggesting that the company had just 12 months’ worth of operating cash left and no other “clinical-stage” projects.
Significant change to the dynamics in the CGT market is coming.
Speaking at ARM’s ‘state of the industry’ briefing, Adrian Rawcliffe, chief executive of Adaptimmune Therapeutics, predicted significant consolidation in the CGTs market in the years ahead. He said that while independent CGT companies will thrive, these will only be few in number in due course, predicting that many CGT developers will merge with major pharmaceutical companies.
Each CGT developer will need to devise their own strategy to survive and thrive in a changing commercial and regulatory environment.
Co-written by Angelika Gornikowska of Pinsent Masons.
16 Feb 2022
02 Feb 2022
UK government plans to revamp holiday pay calculation for part-year workers