Emerging oncology: Have we reached the tipping point?
By: David Kriesman and Abhay Patil
More than ever before, the global pharmaceutical industry is leaning on emerging pharma (EP) biotech companies to be the source for pipeline innovation in oncology. In the past three years, these startups have brought half of all new cancer therapies to the market.
In this article, we explore three themes related to the future trajectory of this unique sector and their potential impact on cancer care in the United States.
1. EP is broadening its role from R&D innovator to commercial challenger
Between 2019 and 2023, research and development (R&D) spending among emerging oncology companies has nearly doubled to $24B annually. Over the next three to five years, it’s estimated that emerging oncology companies will account for more than half of the pipeline.
Looking forward, emerging oncology is expected to have a major competitive presence beyond the clinic. The EP oncology business is expected to more than triple by 2026 and account for 14% of U.S. revenues.
The market could see over 100 new companies competing for customer access and share of voice. Of these new EP companies, 40% fail to sustain business long-term or get acquired, according to ZS research on first launch companies from 2011 to 2022. While not every EP company makes it, that will result in significantly more pressure to differentiate with fewer shots on goal.
2. Pharma will be competing with EP across the board
In short, big pharma will now be facing startup-type competition in nearly every tumor type, versus selected markets today, across both solid and liquid tumors.
In tumors historically dominated by big pharma, such as prostate and breast cancer, several startups are expected to innovate and find their niche, for example, Xencor’s bispecific in prostate cancer and Arvinas’s oral protein degrader targeting breast cancer.
EP companies are also preparing novel therapeutics for rarer diseases with high unmet needs, such as Springworks in desmoid tumors, or rare patient subtypes, such as Merus for tumors harboring NRG1 fusions.
3. EPs continue to drive diversity in MOA and platforms
Pipeline innovation from EP is split between improving upon existing mode of actions (MOAs) and development of novel MOAs. Next generation small molecule inhibitors, antibody-drug conjugates (ADCs), multi-specific antibodies, and new immunotherapy checkpoints, such as TROP-2, Nectin-4, will still account for approximately 60% of the pipeline in 2026. The remaining activity centers on cell and gene therapy (C>), cancer vaccines, protein degraders, radiopharmaceuticals and other emerging platforms.
Up until this point, EP has had minimal commercial presence in C>. However, the number of new entrants is expected to grow seven times in the next four years, with players such as Adaptimmune Therapeutics, Iovance Biotherapeutics and Allogene Therapeutics set for launches in the next one to two years. The number of companies developing cancer vaccines or oncolytic viruses are also on the rise.
Over the next three to five years, the emerging oncology segment will help shift the cancer care landscape, driving an increasing number of targeted therapies and novel MOAs, offering more effective and less toxic treatments for cancer patients.
So, what does this mean for big pharma? The opportunity is ripe for collaboration. Mergers and acquisitions activity is expected to remain intense, with more ways to address portfolio gaps and expand into novel modalities likely shifting more spend to bets on platforms and earlier phase assets. Yet, this inorganic growth will come at an increasingly higher cost as average deal premiums continue to rise. At the same time, competition from EPs will become ubiquitous. The global pharmaceutical industry will need to counter the agility, science-forward presence with key opinion leaders (KOLs) and innovative spirit of these organizations, otherwise this will start to feel like a “David versus Goliath” industry story.
Source footnotes:
1. *Note: Emerging Pharma defined as companies with Oncology revenue ≤500M and ≤2 marketed products and ≤5 late stage pipeline products
2. Evaluate Pharma (As accessed on 28th March 2023) for revenue data
3. Citeline (As accessed on April 17th, 2023) for data on clinical trials
4. Evaluate Pharma Omnium (As accessed on April 24th, 2023) for R&D spending
5. Official company websites
